Annual report 2010 Contents

In review

1 Company Overview 3 Goals and strategies

Performance 2010

4 Board of directors’ report 9 Board Responsibility statement 10 Annual accounts - group 10 Consolidated Statement of financial position 11 Consolidated Income statement and consolidated statement of comprehensive income 12 Consolidated Statement of changes in equity 13 Consolidated Cash flow statement 14 Notes to the consolidated accounts 29 Annual accounts - parent company 29 Statement of financial position 30 Income statement and statement of comprehensive income 31 Cash flow statement 32 Notes to the accounts 37 Auditor’s report 39 Share and shareholder information

Corporate governance

42 Corporate governance statement 2010 45 Presentation of the board of directors 46 Presentation of management 47 Contact information In review Company overview

Ⅵ History 2005 Ⅲ Closed a ten ship bareboat charter agreement with Overseas Shipholding Group, Inc. (OSG) Ⅲ Aker American Shipping ASA (AKASA) established and listed on Oslo Stock Exchange. Purchased the former Kvaerner Philadelphia Shipyard 2007 Ⅲ Obtained permanent ownership financing for ten vessels and This is American issued NOK 700 million bond for investments in vessels and operations Ⅲ Split of Aker American Shipping Company Shipping’s ship owning operations from its ship building operations. Aker American American Shipping Company ASA (AMSC) is a shipping company that owns and Shipping sold Aker Philadelphia Shipyard leases world-class quality U.S. Jones Act vessels for operations between ports Ⅲ Took delivery of the first three in the United States. The Company is headquartered in Oslo, Norway, with its product tankers principal operating subsidiaries located in Philadelphia, Pennsylvania, USA. 2008 Ⅲ Aker ASA reduced its AMSC’s business model is to own and bareboat charter vessels for operation in ownership interest, as planned, the U.S. Jones Act market through its wholly owned subsidiary leasing to 19.9% due to U.S. Jones Act restrictions which would have companies. All of its vessels are fully qualified to participate in the domestic limited its further ambition for maritime trades of the United States. developing maritime business outside the U.S. Ⅲ Name changed from Aker The vessels which AMSC owns are the most modern product tankers in American Shipping ASA to operation and use the proven design of Hyundai Mipo Dockyard. These 46,000 American Shipping Company ASA. Trading ticker also dwt vessels are state-of-the-art, fuel efficient vessels with highly flexible cargo changed from AKASA to AMSC systems. Their outstanding performance, reliability and quality have been Ⅲ Took delivery of two more recognized by those chartering these vessels over the last four years. product tankers 2009 Ⅲ Finalized settlement agreement with OSG that settled commercial disputes between the companies Ⅲ Took delivery of two additional Financial calendar 2011 tankers; sold first shuttle tanker contract to OSG

13 April Annual General Meeting 2011 2010 14 April 1st quarter interim results Ⅲ Took delivery of two product tankers 5 August 2nd quarter interim results Ⅲ Sold second shuttle tanker 4 November 3rd quarter interim results contract to OSG Ⅲ Maintained ongoing compliance (Dates subject to change) with conditions of OSG Settlement

American Shipping Company annual report 2010 1

In review Goals and Strategies

Goals and Strategies

Be the preferred ship owning and lease finance Company in the Jones Act market

Ⅲ Generate stable cash flow from long term bareboat charters protected from short term market movements, but with exposure to the long term positive outlook for Jones Act shipping Ⅲ Work closely with charterers to ensure that maximum value is gained from each of the time charters and the profit sharing arrangements Ⅲ Maintain stringent controls on all costs associated with the management of AMSC

Have the newest, safest and most modern and operationally friendly fleet

Explore and invest in value creation opportunities for our shareholders

Ⅲ Continue to focus our efforts on value creation opportunities both in the Jones Act market and the financial markets and position ourselves to take advantage of these opportunities Ⅲ Create shareholder value through optimal structuring and financial transactions

American Shipping Company annual report 2010 3 Performance 2010 Board of Directors’ report

Continues building the most modern product tanker fleet in the U.S. Jones Act

Introduction delivered) are all on bareboat charter to be qualified to operate in the U.S. coastwise American Shipping Company ASA (“AMSC” subsidiaries of OSG. or “Jones Act” trade. Compliance with the or the “Company”) is a ship owning and lease finance exception requires, among lease finance company with a modern fleet Goals and strategies other things, that AMSC’s subsidiaries of tanker vessels operating in the U.S. AMSC’s primary goal is to be the preferred bareboat charter their vessels to qualified domestic (“Jones Act”) trades. During 2010, ship owning and lease finance company in U.S. citizen operators. AMSC took delivery of its eighth and ninth the U.S. Jones Act market. The Group will The Oil Pollution Act of 1990 (“OPA 90”) product tankers, realizing total operational continue to explore and invest in value was enacted as a result of the Exxon Valdez revenues of USD 68.3 million with operating creation opportunities for our shareholders. oil spill. OPA 90 created a new legal regime income before interest, taxes, depreciation AMSC employs several strategies to to increase pollution prevention, ensure and amortization of USD 66.0 million. In ensure the attainment of our goals. The better spill response capability, increase connection with the settlement with Over- Group will continue to work closely with its liability for spills, and facilitate prompt seas Shipholding Group, Inc. (“OSG”) in customer to ensure that maximum value is compensation for cleanup and pollution 2009 (“Settlement Agreement”), AMSC sold gained from each of the time charters and damage. OPA 90 also established phase-out its contract for the second shuttle tanker to the profit sharing arrangements. AMSC dates for existing single-hull tanker vessels OSG in 2010 for USD 35.0 million. AMSC focuses on long-term charters to generate and required all newly constructed tanker currently has one additional tanker on order stable cash flows so as to protect the vessels to meet double-hull standards. with Aker Philadelphia Shipyard, Inc. (Aker Group’s revenue from short-term market Beginning in 2015 all tanker vessels trading Philadelphia Shipyard, Inc. is a wholly movements. The Group will maintain strin- in the United States must meet double-hull owned subsidiary of Aker Philadelphia Ship- gent controls on all of its costs. In addition, standards. yard ASA; collectively “AKPS”) and options by maintaining a close, commercial Although 2009 and 2010 marked a for four additional tankers. The nine product relationship with Aker Philadelphia Ship- lower demand for oil products due to the tankers in operation and the one product yard, the Group seeks to secure the timely poor global economy, we remain optimistic tanker on order have all been, or will be delivery of all of our vessels. about the long term demand for tankers. bareboat chartered to Overseas Shipholding AMSC has the most modern fleet in the Group, Inc. or one of its subsidiaries market. The ship design achieves high Key events 2010 (collectively “OSG”). standards and AMSC will continue to seek The eighth and ninth product tankers were delivered to AMSC in May and August, The Group’s business activities improvements for the safety of personnel and protection of the environment. respectively. The eighth and ninth vessels, The main entities in the AMSC Group The Group will continue to focus our the Overseas Martinez and the Overseas (“Group”) are the Norwegian holding com- efforts on additional value creation oppor- Anacortes, are both on long-term time char- pany American Shipping Company ASA, the tunities, both in the Jones Act market as ter from OSG to Tesoro. The long-term U.S. intermediate holding company Ameri- well as in the financial markets. It is the bareboat charter agreements that the Group can Tanker Holding Company, Inc. (ATHC), Group’s plan to be in a position to take has with subsidiaries of OSG have different American Tanker, Inc. (ATI), American Ship- advantage of these opportunities in order to fixed charter periods of between five and ten ping Corporation (ASC) and the ten separate create value for our shareholders. years from delivery and, as such, these leasing companies (ASC Leasing I through vessels have secure, stable cash flows with X, Inc.) that own (or will own) each of the ten charters expiring between 2014 and 2021, product tankers. American Shipping Com- The Jones Act market with options for OSG to extend the bareboat pany ASA is domiciled in Oslo, Norway, with The U.S. cabotage law, commonly referred charter term. Upon satisfaction of certain the U.S. subsidiaries and operations located to as the Jones Act, requires all commercial conditions in the Settlement Agreement, all in Philadelphia, Pennsylvania, and Wilming- vessels transporting cargoes between ports of the charters will be extended to ten years ton, Delaware, USA. in the United States to be built, owned, from the settlement date of December 2009, AMSC’s current business model is to operated and manned by U.S. citizens and with option extensions remaining in place. own and bareboat charter vessels for oper- to be registered under the U.S. flag. Further, in a U.S. product tanker market with ation in the U.S. Jones Act market. The SinceAMSCisnotaU.S.citizenquali- strong fundamentals, the charter agree- vessels are being built at AKPS, a leading fied to operate vessels in the Jones Act, it is ments have upside potential above the fixed U.S. commercial shipyard. AMSC, through dependent on the lease finance exception bareboat charter rates through a profit shar- its subsidiaries, will own and bareboat char- which permits foreign ownership of Jones ing mechanism. ter the vessels to vessel operating compa- Act ships under certain conditions. If AMSC nies. Ten vessels (either delivered or to be does not fully comply with the terms of the lease finance exception, its vessels will not

4 American Shipping Company annual report 2010 Performance 2010 Board of Directors’ report

Review of the annual accounts Cash flow 2010 versus seven vessels in 2009. AMSC prepares and presents its accounts The Group’s cash flow is primarily com- Prepayments made to AKPS in accordance according to International Financial Report- posed of bareboat charter hire paid. Total with the shipbuilding contracts for the ing Standards (IFRS) as adopted by the EU, net cash flow from operating activities in vessels under construction were and has one operating segment. 2010 was positive USD 44.6 million, and in USD 24.7 million at 31 December 2010 and 2009 was positive USD 39.4 million. USD 74.7 million at 31 December 2009. Profit and loss accounts Net cash flow from investment activities Interest-bearing long-term receivables In 2010, AMSC had operating revenues of was negative USD 140.4 million in 2010 totaled USD 11.7 million and USD USD 68.3 million versus operating revenues compared to a negative USD 192.6 million in 7.3 million as of 31 December 2010 and of USD 54.4 million in 2009 as the fleet 2009. This is mainly attributable to the ves- 2009, respectively. These amounts include grew from seven to nine vessels. Revenues sels delivered in each year as well as to the deferred principal obligation (DPO) are recognized on a monthly basis and milestone payments made to AKPS for the receivable from OSG. represent the income from the bareboat vessels currently on order. In addition, At 31 December 2010, total assets charter agreements. No revenue from the included in 2010 and 2009 is the return of were USD 1,008.1 million versus USD profit sharing arrangement with OSG was our capital investment in the shuttle tanker 866.3 million at 31 December 2009. The recognized in 2010 or 2009. The Group’s shipbuilding contracts that were sold as part increase represents the delivery of two operating profit before interest, taxes, of the Settlement Agreement. additional vessels in 2010. depreciation and amortization (EBITDA) Net cash flow from financing activities At 31 December 2010, total equity was amounted to USD 66.0 million in 2010 was USD 104.1 million in 2010 related to USD 58.2 million. The equity ratio was 6% compared to USD 45.2 million in 2009. the take-out financing of the two vessels of total assets. Corresponding amounts for Depreciation was USD 34.2 million in delivered in 2010 versus USD 113.6 million 2009 were USD 78.8 million and 9%, 2010 versus USD 27.9 million in 2009. in 2009 related to the take-out financing of respectively. AMSC’s operating profit (EBIT) was USD the two vessels delivered in 2009. Total current liabilities as of 31.8 million in 2010 versus USD 17.3 million 31 December 2010 were USD 148.9 million, in 2009. Balance sheet and liquidity consisting of USD 95.8 million for the Net financial items and other gain was As of 31 December 2010, American Ship- mark-to-market valuation of the interest rate negative USD 52.3 million in 2010 compared ping Company had cash on deposit with swap contracts, USD 8.3 million for trade to negative USD 18.8 million in 2009. Gain banks totaling USD 86.8 million. Of this and other payables and USD 44.8 for short- on the sale of the second shuttle tanker total amount, USD 46.0 million is term interest bearing debt. The correspond- shipbuilding contract was USD 12.2 million non-current cash held for specified uses ing total current liabilities as of in 2010 compared to a gain on the sale of and USD 19.7 million is current cash held 31 December 2009 of USD 113.6 million, the first shuttle tanker shipbuilding contract for specified uses. The corresponding consisted of USD 79.0 million for the of USD 11.2 million in 2009. Net financial amounts for 2009 were USD 57.8 million in mark-to-market valuation of the interest rate items of negative USD 64.5 million in 2010 cash on deposit with banks and USD swap contracts, trade and other payables of consist primarily of an unrealized, non-cash 25.2 million and USD 12.1 million in USD 2.8 million and USD 31.8 million for loss on the mark-to-market valuation of non-current and current cash held for short-term interest bearing debt. interest rate swap agreements of USD specified uses respectively. The increased Non-current liabilities totaled USD 16.8 million, net interest expense of USD cash in 2010 is primarily related to the sale 801.0 million at 31 December 2010, 45.7 million and other financial expense of of the second shuttle tanker shipbuilding consisting of bank debt of USD USD 4.1 million, offset by net foreign contract in the fourth quarter of 2010. Cash 611.9 million related to the nine vessels exchange gain of USD 2.1 million. Net held for specified uses, in accordance with owned by AMSC, a bond payable of USD financial items of negative USD 30.0 million the Settlement Agreement, can be used to 167.1 million and a subordinated loan of in 2009 consisted primarily of an unrealized, pay any remaining milestone payments due USD 22.0 million. Non-current liabilities non-cash gain on the mark-to-market valu- and final purchase price payments for the totaled USD 673.9 million at 31 December ation of interest swap contracts of USD product tankers, debt service require- 2009, consisting of bank debt of USD 21.6 million, offset by net interest expense ments, selling, general and administrative 496.3 million related to the seven vessels of USD 34.9 million and other financial expenses (subject to a maximum of USD owned by AMSC, a bond payable of USD expense of USD 16.7 million. 1.0 million per quarter), tax expenses, and 157.6 million and a subordinated loan of Income tax benefit for 2009 was USD prepayments of the BNP Paribas (“BNP”, USD 20.0 million. 0.2 million. formerly Fortis Capital Corp) loan. AMSC’s 2010 net loss was USD Other current assets were USD Risks 20.5 million versus a 2009 net loss of USD 0.8 million as of 31 December 2010. Other AMSC faces risks related to construction of 1.3 million. The net loss of 2010 includes current assets as of 31 December 2009 vessels and market risk related to financing the negative effect of the unrealized, were USD 22.5 million, mainly representing and ownership of vessels. The risk related non-cash loss on the mark-to-market valu- assets held for sale related to the second to vessel construction is primarily AKPS’s ation of the interest rate swap contracts. shuttle tanker shipbuilding contract which ability to deliver the vessel on time. The The 2010 earnings per share (EPS) was was delivered in the fourth quarter of 2010. overall market risk is related to the future of negative USD 0.74 and the diluted EPS Property, plant and equipment as of the Jones Act, but market experts think it is was negative USD 0.74. The corresponding 31 December 2010 and 2009 was USD very unlikely that the Jones Act will be figures for 2009 were negative USD 0.08, 884.1 million and USD 703.9 million, overturned or that waivers to bring in for- for both basic and diluted EPS. respectively, and includes nine vessels in eign built vessels will be granted. Although

American Shipping Company annual report 2010 5 Performance 2010 Board of Directors’ report

the Group’s vessels are all on long term AMSC would be required to purchase solidated equity for the Group is primarily bareboat charter contracts, AMSC is 100% of the loans from CFSC at par plus impacted through the results of its oper- exposed to normal market risk related to accrued interest and unpaid expenses (the ations and through the foreign currency imbalance between supply and demand for principal loan balance is approximately translation impact of its Norwegian Kroner the future employment of its fleet. USD 16.0 million as of 31 December 2010). (NOK) denominated bond. The Group AMSC and its subsidiaries have AMSC closely monitors this link to AKPS closely monitors changes to the USD/NOK implemented comprehensive risk and its impact on operations through fre- foreign currency rate and is prepared to act management systems and procedures. quent updates with AKPS’s management. quickly to help put in place the appropriate Maintaining open and effective In view of AKPS’s financial condition and measures to prevent a negative impact to communication is stressed by the Board of record of delivering vessels on time, this the equity covenant requirement. The Directors. It is important that any deviations counter-party credit risk is presently Group’s equity under the covenant calcu- from plan specifications or expected per- regarded as low. In addition, AMSC’s take- lation was USD 154.0 million as of formance are identified quickly so that out financing has a loan commitment that 31 December 2010. The Group currently corrective measures can be taken at an expires on 14 May 2011. It is expected that views this risk as moderate. early stage, thus limiting the consequences the tenth vessel will be delivered prior to Based on the information known of such deviations. the expiration date. However, if the vessel today, and subject to the above noted AMSC and its subsidiaries adhere to a is not delivered by that date, AMSC will risks, the Board deems that the Group is risk policy designed to minimize exposure seek an extension of the commitment from financially sound. to financial market risk, such as foreign its lenders. There is no guarantee that the exchange, interest risk and counterparty lenders will approve such an extension. Events after the balance sheet date risk. In addition to the above mentioned On 1 March 2011, AMSC held an Extra- cross default on AKPS’s construction ordinary General Meeting for the purpose Financial risk and risk management financing, AMSC also has additional risk of electing a new board member. John AMSC’s activities expose it to a variety of associated with AKPS in the form of Rose resigned from his position as director financial risks: market risk, including cur- guarantees on a loan that AKPS has with of the Board of Directors and Lars Sol- rency risk, interest rate risk, price risk, the Pennsylvania Industrial Development bakken was elected for a two year term. credit risk, and liquidity risk. AMSC’s over- Corporation Regional Center, LP XV and AMSC has counterparty risk asso- all risk management program focuses on the Counter Guarantee (an agreement ciated with various guarantees AMSC has the unpredictability of financial markets and between AKPS and the governmental par- given on obligations of Aker Philadelphia seeks to minimize potential adverse effects ties which provided funding for the ship- Shipyard, Inc., pursuant to terms under on AMSC’s financial performance. AMSC yard renovation and for workforce training). which the companies became separate uses derivative financial instruments to We closely monitor the factors associated legal entities in 2007. The continued oper- hedge certain risk exposure. with the cross defaults and guarantees. ations at AKPS will be dependent upon its AMSC operates in a business environ- AKPS currently does not have any new ability to obtain new orders or financing for ment that is capital intensive. The Group is orders for building vessels beyond our last building additional vessels. On 18 February dependent upon having access to long-term product tanker expected to be delivered in 2011, the tentative agreement (signed in funding for vessels and other loans and debt the second quarter of 2011. However, they mid-December 2010) between AKPS and facilities to the extent its own cash flow from have signed an agreement with Phila- the Philadelphia Shipyard Development operations is insufficient to fund its oper- delphia Shipyard Development Corporation Corporation became effective. That ations and capital expenditures. AMSC has (PSDC) which provides a basis for AKPS to agreement provides the basis for AKPS to secured take-out financing for the ten prod- build its next two product tankers. build two additional vessels. As a result, no uct tankers. Credit risk associated with OSG and liability has been recorded under the guar- Through both the take-out financing associated with our cash and bank depos- and the NOK bond, the Group is exposed its is regarded as low. antees. to fluctuations in interest rates. The interest AMSC is also faced with the risk of The going concern assumption rate risk related to the permanent term loan refinancing its vessels when the current for the ten product tankers is offset by the term loan is due and under conditions In view of AMSC’s financial position and its use of financial instruments, namely inter- imposed upon the Company by the projections, the Board confirms that the est rate swap agreements to hedge the Settlement Agreement. Although this 2010 annual accounts have been prepared interest risk. The Group entered into inter- particular risk does not exist in the short based on the assumption of a going con- est rate swaps to convert its floating rate term (as the refinancing is not required cern. debt to a fixed rate under their USD before 2014), there can be no assurance 770 million loan facility. that the Group will be able to refinance its AMSC’s take-out financing has certain debt when due depending on the market cross-defaults to AKPS’s construction conditions as well as the availability of financing. In addition, the construction loan credit. facility with Caterpillar Financial Services AMSC is subject to a covenant in its Corp. (CFSC) has a put/call agreement. In bond obligation that requires the Group to the event that AKPS defaults under the maintain a minimum level of USD construction financing, CFSC may “put” 140.0 million of consolidated equity. Con- the entire facility to AMSC, whereupon

6 American Shipping Company annual report 2010 Performance 2010 Board of Directors’ report

Parent company accounts and Tier II requirements. When in operation, Aker Philadelphia Shipyard for services allocation of profit for the year these new engines produce lower levels of related to IT, human resources and certain The profit and loss account of American pollutants and particulate than previous other services. Furthermore, AMSC has Shipping Company ASA shows a loss for versions. The vessel’s emergency diesel agreements with Aker ASA and Resource the year 2010 of USD 9.9 million. The generator, hydraulic power packs and Group International which primarily includes Board of Directors proposes that the loss rescue and lifeboat engines have all been accounting and tax services. As such, the for the year be allocated as shown below: upgraded as well. equivalent full time staff of AMSC would be No significant accidental environ- approximately three persons as of Dividend payments - mental emissions were recorded in 2010 or 31 December 2010. in 2009. Other equity negative USD 9.9 million Equal-opportunity employer AMSC focuses on the safety of our American Shipping Company ASA seeks to Total allocated negative USD 9.9 million employees and their surroundings. We be an attractive employer and maintains a Unrestricted equity work safely and in a manner that protects human relations policy that is open and fair. amounts to negative USD 19.0 million and promotes the health and well-being of AMSC is committed to providing equal our employees and the environment. employment opportunity to all employees Safety, quality and environment and applicants for employment, regardless Safety of personnel and protection of the Organization of race, ethnic background, gender, reli- environment is an important part of On 18 January 2010, the Board of Directors gion, age or any other legally protected AMSC’s strategy. AMSC takes its environ- announced the appointment of Gregory J. status. Diversity strengthens AMSC’s over- mental responsibilities seriously. Beginning Matecki as its new President and CEO after all capacity and skills. with our fifth product tanker, our vessels the resignation of Robert K. Kurz in The entire industry faces the challenge have been modified to incorporate three December 2009. Mr. Matecki is the Group’s of developing and sustaining diversity in improved diesel-powered electrical Chief Financial Officer and will continue to the workplace. At year-end 2010, one of generating sets to power the vessel’s elec- hold that position. Mr. Matecki also AMSC’s two full time employees is a trical system. These diesel engines comply assumed the role of General Manager in woman (controller). In addition, the chair- with the Environmental Protection Agency’s 2010. AMSC has a services agreement with man of the board of directors is a woman.

American Shipping Company annual report 2010 7 Performance 2010 Board of Directors’ report

Corporate governance mendations on corporate governance for remain in existence and thereby preserve American Shipping Company ASA’s corpo- listed companies with the Group’s own the need for all commercial vessels trans- rate governance policy exists to ensure an corporate governance procedures and porting cargoes between ports in the United appropriate division of roles among the practice. The findings show that the States to be built, owned, operated and company’s owners, board of directors, and Company is in compliance with respect to manned by U.S. citizens and to be regis- executive management. Such a separation the requirements and substantially in con- tered under the U.S. flag. The fixed charter of roles ensures that goals and strategies formance with those recommendations. agreements with OSG and its subsidiaries, are prepared, adopted corporate strategies The Company’s board chairman is elected assuming ten year charter terms under the are implemented, and the results achieved at the Company’s annual shareholders’ Settlement Agreement, would secure are subject to verification and follow-up. meeting and the shareholder-elected direc- AMSC’s leasing backlog in excess of USD Applying these principles also contributes tors are elected for two year terms. At the 765 million from bareboat charter revenues. to satisfactory group wide monitoring and Company’s annual general meeting in April Any profit sharing contribution will come in verification of activities. An appropriate 2010, it was voted and approved that the addition to the fixed bareboat charter rev- division of responsibilities and satisfactory Company would have only three board enues. internal controls will contribute to the members. The extent of profit sharing con- greatest possible value creation over time, Following the March 2011 extra- tributions will depend on the time charter to the benefit of shareholders and other ordinary general meeting, the Board rates obtained by OSG as well as OSG’s stakeholders. AMSC’s corporate gover- members of AMSC are as follows: ability to operate the vessels in a cost effi- nance guidelines are presented in greater cient manner. detail on page 42 of this annual report. Chairman Annette Malm Justad AMSC believes there may be an Good corporate governance, that is, Board Member Dag Fasmer Wittusen increasing need for more vessels within proper board conduct and company Board Member Lars Solbakken existing and new market segments. AMSC management, are key to AMSC’s efforts to will continue to evaluate opportunities in build and maintain trust. AMSC is commit- Further description of the Board Members the various market segments with the goal ted to maintaining an appropriate division is on page 45. of growing the Group and creating long- of responsibilities between the Company’s term shareholder value. governing bodies, its Board of Directors, Outlook and management. AMSC has compared The U.S. Jones Act market, which has been the Norwegian requirements and recom- in existence since 1920, is expected to

Oslo, 18 February 2011 The Board of Directors American Shipping Company ASA

Annette Malm Justad John Rose Dag Fasmer Wittusen Chairman Board Member Board Member

Gregory J. Matecki General Manager

8 American Shipping Company annual report 2010 Performance 2010 Board Responsibility statement

Board Responsibility statement pany ASA have been prepared in accord- The consolidated and parent annual Today, the Board of Directors and the ance with the Norwegian Accounting Act financial statements give a true and fair General Manager reviewed and approved and Norwegian accounting standards as of view of the assets, liabilities, financial posi- the Board of Directors’ Report and the 31 December 2010. The Board of Directors’ tion and profit (or loss) as a whole as of consolidated and parent company annual Report for the group and the parent com- 31 December 2010 for the group and the financial statements for American Shipping pany is in accordance with the require- parent company. Company ASA as of and for the year ending ments in the Norwegian Accounting Act The Board of Directors’ Report for the 31 December 2010 (Annual Report 2010). and Norwegian Accounting Standard no. group and the parent company includes a American Shipping Company ASA’s 16 as of 31 December 2010. true and fair review of: consolidated financial statements have Ⅲ the development and performance of been prepared in accordance with IFRSs To the best of our knowledge: the business and the position of the as adopted by the EU and additional dis- The consolidated and parent annual finan- group and the parent company closure requirements in the Norwegian cial statements for 2010 have been pre- Ⅲ the principal risks and uncertainties the Accounting Act. The separate financial pared in accordance with the applicable group and the parent company face statements for American Shipping Com- accounting standards.

Oslo, 18 February 2011 The Board of Directors American Shipping Company ASA

Annette Malm Justad John Rose Dag Fasmer Wittusen Chairman Board Member Board Member

Gregory J. Matecki General Manager

American Shipping Company annual report 2010 9 Performance 2010 Group accounts

American Shipping Company ASA Group Consolidated Statement of Financial Position as of 31 December

Amounts in USD thousands Note 2010 2009

ASSETS Property, plant and equipment 6 884 082 703 898 Interest-bearing long-term receivables 7 11 706 7 341 Non-current cash held for specified uses 12 46 004 25 226 Other non-current assets 8 24 711 74 711 Total non-current assets 966 503 811 176

Assets held for sale 9 - 21 250 Trade and other receivables 10 324 1 001 Tax receivable 446 292 Cash held for specified uses 12 19 665 12 076 Cash and cash equivalents 12 21 173 20 481 Total current assets 41 608 55 100

Total assets 1 008 111 866 276

EQUITY AND LIABILITIES Share capital and share premium 14 180 408 180 408 Accumulated deficit (122 175) (101 641) Total equity attributable to equity holders of the parent 58 233 78 767

Total equity 58 233 78 767

Interest-bearing loans 16 800 980 673 936 Total non-current liabilities 800 980 673 936

Interest-bearing loans 16 44 838 31 803 Trade and other payables 19 8 302 2 712 Tax payable - 82 Derivative financial liabilities 11 95 758 78 976 Total current liabilities 148 898 113 573

Total liabilities 949 878 787 509

Total equity and liabilities 1 008 111 866 276

10 American Shipping Company annual report 2010 Performance 2010 Group accounts

American Shipping Company ASA Group Consolidated Income Statement

Amounts in USD thousands Note 2010 2009 Operating revenues 68 318 54 363 Wages and other personnel expenses 2 (494) (996) Other operating expenses 3 (1 841) (8 178) Operating profit before depreciation 65 983 45 189

Depreciation 6 (34 177) (27 932) Operating profit 31 806 17 257

Gain on sale of shipbuilding contract 4 12 175 11 215 Financial income 4 728 22 241 Financial expenses 4 (65 243) (52 266) Loss before income tax (20 534) (1 553)

Income tax benefit 5 - 247

Net loss for the year (20 534) (1 306)

American Shipping Company ASA Group Consolidated Statement of Comprehensive Income

Amounts in USD thousands (except per share amounts) Note 2010 2009 Net loss for the year (20 534) (1 306) Other comprehensive income for the period, net of tax - - Total comprehensive loss for the year (1) (20 534) (1 306)

Attributable to: Equity holders of the parent (20 534) (1 306)

Basic earnings/(loss) per share 13 (0.74) (0.08) Diluted earnings/(loss) per share (2) 13 (0.74) (0.08)

1) Applicable to common stockholders of the parent company. 2) There was no potentially dilutive securities outstanding as of 31 December 2010 and 2009.

American Shipping Company annual report 2010 11 Performance 2010 Group accounts

American Shipping Company ASA Group Consolidated Statement of Changes in Equity

Equity of common Preferred Share Share Accumulated shareholders Shares Total Amounts in USD thousands Capital Premium deficit of the Parent of subsidiary equity Balance at 31 December 2008 42 462 137 946 (99 394) 81 014 20 000 101 014

Dividends paid from subsidiary - - (941) (941) - (941)

Preferred stock redeemed by subsidiary - - - - (20 000) (20 000)

Total comprehensive loss for the year - - (1 306) (1 306) - (1 306)

Balance at 31 December 2009 42 462 137 946 (101 641) 78 767 - 78 767

Total comprehensive loss for the year - - (20 534) (20 534) - (20 534)

Balance at 31 December 2010 42 462 137 946 (122 175) 58 233 - 58 233

Oslo, 18 February 2011 The Board of Directors American Shipping Company ASA

Annette Malm Justad John Rose Dag Fasmer Wittusen Chairman Board Member Board Member

Gregory J. Matecki General Manager

12 American Shipping Company annual report 2010 Performance 2010 Group accounts

American Shipping Company ASA Group Consolidated Cash Flow Statement

Amounts in USD thousands Note 2010 2009 Net loss before tax (20 534) (1 553) Unrealized foreign exchange gain/loss and other non-cash items 5 037 36 211 Unrealized (gain)/loss interest swaps 11 16 782 (21 626) Net financial expense/(income) 4 45 643 34 942 Non-cash interest expense 4 13 286 10 869 Depreciation 6 34 177 27 932 (Increase)/decrease in: Other current assets 10 356 (245) Other long-term operating assets 7 (4 365) (994) Increase/(decrease) in: Accrued liabilities and other payables 19 (12 366) (21 692) Taxes paid 5 (596) (306) Interest paid, net of capitalized interest 4 (33 025) (24 581) Interest received 4 167 396 Net cash flow from operating activities 44 562 39 353

Investments in ships 6, 8 (160 360) (234 447) Sale of assets 20 000 21 025 Note receivable 10 - 20 867 Net cash flow used in investing activities (140 360) (192 555)

Proceeds from interest bearing loans 16 160 000 180 000 Repayment of interest bearing loans 16 (35 147) (20 278) Increase in non-current cash held for specified uses 12 (20 778) (25 226) Redemption of a subsidiary’s issuance of preferred shares 14 - (20 000) Dividends paid 14 - (941) Net cash flow from financing activities 104 075 113 555

Net change in cash and cash equivalents 8 277 (39 647) Effects of changes in exchange rates on cash 4 4 399

Cash and cash equivalents, including current cash for specified uses as of 1 January 32 557 71 805 Cash and cash equivalents, including current cash for specified uses as of 31 December 12 40 838 32 557

American Shipping Company annual report 2010 13 Performance 2010 Group accounts

American Shipping Company ASA Group Notes to the consolidated accounts

Ⅵ Note 1: Accounting principles

CORPORATE INFORMATION parent company American Shipping Company Expected useful lives of long-lived assets are American Shipping Company ASA (the Company, ASA and its subsidiaries. Subsidiaries are those reviewed annually and, where they differ sig- the Group or AMSC) is incorporated and domi- entities in which AMSC Group either owns, nificantly from previous estimates, depreciation ciled in Norway. The address of the main office is directly or indirectly, over fifty percent of the vot- periods are changed accordingly. Fjordalleen 16, P.O. Box 1423 Vika, NO-0115 ing rights, or otherwise has the power to govern Ordinary repairs and maintenance costs are Oslo, Norway. American Shipping Company ASA their operating and financial policies. Share charged to the income statement during the is listed on the Oslo Stock Exchange. options, convertible debt and other equity financial period in which they are incurred. The The principle activity of the business is to instruments are considered when assessing cost of improvements is included in the asset’s purchase and bareboat charter product tankers, whether an entity is controlled. All intercompany carrying amount when it is probable that the shuttle tankers and other vessels to operators transactions have been eliminated in the con- Group will derive future economic benefits in and end users in the U.S. Jones Act market. solidated results. excess of the originally assessed standard of performance of the existing asset. Improvements STATEMENT OF COMPLIANCE FOREIGN CURRENCY are depreciated over the useful lives of the The consolidated financial statements of Ameri- TRANSLATION AND TRANSACTIONS related assets. can Shipping Company and all its subsidiaries Functional currency Gains and losses on disposals are (AMSC Group, the Group) have been prepared in Items included in the financial statements of each determined by comparing the disposal proceeds accordance with International Financial Reporting subsidiary in the Group are initially recorded in with the carrying amount. Assets to be disposed Standards as adopted by the European Union the functional currency, i.e. the currency that of are reported at the lower of the carrying (IFRS). best reflects the economic substance of the amount and the fair value less selling costs. These accounts have been approved for underlying events and circumstances relevant to issue from the Board of Directors on 18 February that subsidiary. 2011. The consolidated financial statements are IMPAIRMENT OF LONG-LIVED ASSETS presented in United States dollars (USD), which Property, plant and equipment and other non- BASIS FOR PREPARATION is the functional and reporting currency of the current assets are reviewed for potential impair- These consolidated financial statements have parent company and subsidiaries. ment whenever events or changes in been prepared on a historical cost basis, except circumstances indicate that the carrying amount for derivative financial instruments that have Transactions and balances of an asset may not be recoverable. been measured at fair value. Foreign currency transactions are translated into For the purposes of assessing impairment, The consolidated financial statements are USD using the exchange rates prevailing at the assets are grouped at the lowest levels for which presented in USD (thousands), except when dates of the transactions. Receivables and there are separately identifiable, mainly indicated otherwise. liabilities in foreign currencies are translated into independent, cash flows. An impairment loss is USD at the exchange rates ruling on the balance the amount by which the carrying amount of the USE OF ESTIMATES sheet date. Foreign exchange gains and losses assets exceeds the recoverable amount. The The preparation of financial statements in con- resulting from the settlement of such transactions recoverable amount is the higher of the asset’s formity with IFRS requires the use of estimates and from the translation of monetary assets and net selling price and its value in use. The value in and assumptions that affect the reported liabilities denominated in foreign currencies are use is determined by reference to independent, amounts in the financial statements. Although recognized in the income statement. Foreign third party appraisals. Most critical in determining these estimates are based on management’s exchange differences arising in respect of the value in use of vessels is determining the best knowledge of current events and actions, operating business items are included in operat- estimated profit share on existing contracts and actual results may ultimately differ from those ing profit in the appropriate income statement estimating future revenues from new leases. estimates. account, and those arising in respect of financial These estimates are primarily influenced by Estimates and underlying assumptions are assets and liabilities are recorded net as a finan- expectations of future demand in the Jones Act reviewed on an ongoing basis. Revisions to cial item. market. accounting estimates are recognized in the A previously recognized impairment loss is PROPERTY, PLANT AND EQUIPMENT period in which the estimates are revised if the reversed only if there has been a change in the Property, plant and equipment acquired by revision affects that period or in the period of estimates used to determine the recoverable Group companies are stated at historical cost. revision and future periods if the revision affects amount, however not to an extent higher than the Depreciation is calculated on a straight-line basis both current and future periods. carrying amount that would have been and adjusted for impairment charges, if any. The Critical accounting estimates and assump- determined had no impairment loss been recog- carrying value of the property, plant and equip- tions include revenue recognition, accounting for nized in prior years. property, plant and equipment, impairment and ment on the balance sheet represents the cost accounting for financial instruments. The sig- less accumulated depreciation and any impair- nificant factors that affect these estimates and ment charges. Cost includes expenditures that LEASES assumptions are detailed in the accompanying are directly attributable to the acquisition of the Leases where a significant portion of the risks financial statements and footnotes. asset. Interest costs on borrowings to finance the and rewards of ownership are retained by the construction of property, plant and equipment lessor are classified as operating leases. Pay- GROUP ACCOUNTING are capitalized during the period of time that is ment made under operating leases net of any AND CONSOLIDATION PRINCIPLES required to complete and prepare the asset for incentives received from the lessor is charged to The consolidated financial statements of AMSC its intended use. Other borrowing costs are the income statement on a straight-line basis Group include the financial statements of the expensed. over the period of the lease.

14 American Shipping Company annual report 2010 Performance 2010 Group accounts

OTHER NON-CURRENT ASSETS Deferred income taxes risk, cash-flow interest-rate risk and foreign Other non-current assets include milestone Deferred income tax is provided, using the exchange risk. The Group’s overall risk payments made on future committed tankers and liability method, on all temporary differences at management program focuses on the unpredict- the balance of the deferred principal obligation the balance sheet date between the tax bases of ability of financial markets and seeks to minimize (DPO) from a customer. assets and liabilities and their carrying amounts potential adverse effects on the Group’s financial for financial reporting purposes. performance. The Group uses derivative financial TRADE RECEIVABLES Deferred income tax assets are recognized instruments to hedge certain risk exposures. Trade receivables are carried at their anticipated for all deductible temporary differences, carry- Risk-management is carried out under poli- realizable value, which is the original invoice forward of unused tax assets and unused tax cies approved by the Board of Directors. The amount less an estimated valuation allowance for losses, to the extent that it is probable that tax- Board of Directors provides principles for overall impairment of these receivables. A valuation able profit will be available against which the financial risk management as well as policies allowance for impairment of trade receivables is deductible temporary differences, and the carry- covering specific areas such as foreign exchange made when there is objective evidence that the forward of unused tax assets and unused tax risk, interest-rate risk, credit risk, and use of Group will not be able to collect all amounts due losses can be utilized. The carrying amount of derivative financial instruments and non- according to the original terms of the receivables. deferred income tax assets is reviewed at each derivative financial instruments. balance sheet date and reduced to the extent CASH AND CASH EQUIVALENTS that it is no longer probable that sufficient taxable Credit Risk Cash and cash equivalents comprise cash on profit will be available to allow all or part of the Due to the nature of the Group’s operations, hand, deposits held at call with banks, other deferred income tax asset to be utilized. revenues and related receivables, including the short-term highly liquid investments with original Expected utilization of tax losses are not dis- DPO, are currently concentrated amongst two maturities of three months or less. counted when calculating the deferred tax asset. parties. The Group continually evaluates the Cash held for specified uses, in accordance Deferred income tax assets are recognized credit risk associated with customers. with the Settlement Agreement (see note 23), is when it is probable that they will be realized. presented separately and can be used to pay any Determining probability requires the Group to Interest Rate Risk remaining deposits and final purchase price estimate the sources of future taxable income The Group is exposed to fluctuations in interest payments for the ten product tankers, debt serv- from operations and reversing taxable temporary rates for its variable interest rate debt related to ice requirements, selling, general and admin- differences. Determining these amounts is sub- the bond financing. With regards to the BNP istrative expenses (subject to a maximum of USD ject to uncertainty and is based primarily on takeout financing, the Group has entered into 1.0 million per quarter), tax expenses, and pre- expected earnings from existing contracts and interest swap agreements to lock in the interest payments of the BNP Paribas (“BNP”, formerly expected profit sharing participation. rate paid. Fortis Capital Corp) loan. Deferred income tax assets and liabilities are measured at the tax rates that are expected to Foreign Exchange Risk SHARE CAPITAL apply to the year when the asset is realized or Ordinary shares are classified as equity. American Shipping Company is exposed to for- the liability is settled, based on tax rates (and tax eign currency risk related to its Norwegian Kroner Incremental costs directly attributable to the laws) that have been enacted or substantively issue of new shares options are shown in equity (NOK) bond (NOK 977.7 million outstanding as of enacted at the balance sheet date. 31 December 2010) and certain cash accounts, as a deduction, net of tax, from the proceeds. Income tax relating to items recognized Preferred shares of a subsidiary are classified as however, the Group will enter into foreign directly in equity is recognized in equity and not exchange derivative instruments, from time to equity. Where any Group company purchases in the income statement. the Company’s equity share capital (treasury time, to mitigate that risk. See additional dis- cussion under Liquidity Risk. shares), the consideration paid, including any PROVISIONS directly attributable incremental costs, is A provision is recognized when the Group has a deducted from equity. present obligation (legal or constructive) as a Counter-party Credit Risk result of a past event and it is probable (i.e. more AMSC’s take-out financing has certain cross- INTEREST-BEARING LIABILITIES likely than not) that an outflow of resources defaults to Aker Philadelphia Shipyard, Inc.’s All loans and borrowings are initially recognized embodying economic benefits will be required to (Aker Philadelphia Shipyard, Inc. is a wholly at cost, being the fair value of the consideration settle the obligation, and a reliable estimate can owned subsidiary of Aker Philadelphia Shipyard received net of issue costs associated with the be made of the amount of the obligation. Provi- ASA; collectively “AKPS”) construction financing borrowing. sions are reviewed at each balance sheet date for the ten product tankers. In addition, the con- After initial recognition, interest-bearing and adjusted to reflect the current best estimate. struction loan facility with Caterpillar Financial loans and borrowings are subsequently meas- The amount of the provision is the present Services Corp. (CFSC) has put/call agreement. In ured at amortized cost using the effective interest value of the risk adjusted expenditures expected the event that AKPS defaults under the con- method; any difference between proceeds (net of to be required to settle the obligation, struction financing. CFSC may “put” the entire transaction costs) and the redemption value is determined using the estimated risk free interest facility to AMSC, whereupon AMSC would be recognized in the income statement over the rate as the discount rate. Where discounting is required to purchase 100% of the loans from period of the interest-bearing liabilities. Amor- used, the carrying amount of provision increases CFSC at par plus accrued interest and unpaid tized cost is calculated by taking into account in each period to reflect the unwinding of the expenses (the principal balance is approximately any issue costs, and any discount or premium on discount by the passage of time. This increase is USD 16.0 million as of 31 December 2010). settlement. recognized as interest expense. AMSC closely monitors this link to AKPS and its Gains and losses are recognized in net profit impact on operations through frequent updates or loss when the liabilities are derecognized or PENSIONS with AKPS’s management. If there is an event of impaired, as well as through the amortization The Group has a defined contribution pension default under AKPS’s construction financing and process. plan that covers its employees whereby con- the construction debt is accelerated, AMSC’s tributions are paid to qualifying pension plans. take-out financing would also be in default, INCOME TAXES Once the contributions have been paid, there are which would require AMSC to seek waivers from Current income taxes no further payment obligations. Plan con- its lending syndicate. As a condition to any such Income tax receivable and payable for the cur- tributions are charged to the income statement in waiver, a lender might, among other things, rent period are measured at the amount the period to which the contributions relate. require additional collateral or guarantees, expected to be recovered or paid to the taxation increase the interest rate, and/or impose authorities. The tax rates and tax law as used to FINANCIAL RISK MANAGEMENT fees. There is no guarantee the lending syndicate compute the amount are those that are enacted The Group’s activities expose it to a variety of would grant any such waiver or that AMSC would or substantively enacted at the balance sheet financial risks: market risk (including currency have the resources to meet the lender’s financial date. risk, fair value interest risk and price risk), credit terms, in which case they could demand

American Shipping Company annual report 2010 15 Performance 2010 Group accounts

immediate repayment of their loans, foreclose on negatively different from what the Company proj- RELATED PARTY TRANSACTIONS their collateral and/or exercise their other rights ects, the risk of failing the covenant will increase All transactions, agreements and business activ- and remedies. accordingly. The Company monitors the USD/ ities with related parties are, in the Group’s opin- AKPS currently has no orders for vessels NOK foreign exchange rate and its impact on the ion, conducted on an arm’s length basis according beyond the twelve ship order from AMSC, which bond covenant daily. As of 31 December 2010, a to ordinary business terms and conditions. will be completed in Q2 2011. With respect to the foreign exchange rate of 5.39 NOK/USD would AKPS construction financing, the counter-party have caused a breach in the minimum con- REVENUE RECOGNITION credit risk is currently regarded as low. solidated equity covenant (the actual rate at 31 Revenue is recognized only if it is probable that December 2010 was 5.84 NOK/USD). The future economic benefits will flow to American Capital Management Risk Company’s adjusted equity under the covenant Shipping Company, and these benefits can be AMSC’s objectives when managing capital are to calculation was USD 154.0 million as of 31 measured reliably. Revenues related to fixed safeguard its ability to continue as a going con- December 2010. If the Company’s equity falls term vessel bareboat charter agreements are cern in order to provide returns for shareholders below the required minimum, the Company can recognized over the charter period. Time-charter and benefits for other stakeholders, while main- request a waiver or an amendment to the cove- agreements may contain a revenue sharing taining an optimal capital structure to minimize nant from the bondholders via a bondholders agreement with the charterer. Revenue related to the cost of capital. To meet these capital struc- meeting. It can not be determined if the bond- profit sharing agreements is recognized when the ture objectives, AMSC will review annually with holders would approve such a waiver or amount becomes fixed and determinable. Rev- its Board any proposed dividends as well as any amendment to the covenant. It is projected that enue related to the deferred principal obligation needs to raise additional equity for future busi- in 2011 the Company will call for a bondholders (note 7) is discounted in cases where a payment ness opportunities or to reduce debt. meeting to address this covenant. Thus, the period extends beyond 12 months. Company currently views this risk as moderate. Funding/Investment Risk As mentioned above, AKPS has no orders SEGMENT INFORMATION The current global financial crisis has placed for vessels beyond the twelve ship order from AMSC has only one operating segment. All oper- existing and future financing sources at AMSC. AKPS has entered into non-cancellable ations and bareboat charter revenues are in the risk. AMSC regularly monitors the health of its commitments with various third party suppliers U.S. take-out financing lending syndicate. Addition- for four additional vessels (AKPS Hulls 017-020). ally, AMSC monitors the financial health of the If AKPS does not build Hulls 017 and 018, then it BASIC AND DILUTED EARNINGS PER SHARE financial institutions which it uses for cash man- is estimated that AKPS would incur expenses in The calculation of basic earnings per share is agement services and in which it makes deposits excess of USD 25 million. If AKPS does not build based on the profit attributable to ordinary and other investments. AMSC responds to the remaining option vessels, then AKPS would shareholders adjusted for preferred share divi- changes in conditions affecting its financing incur significant additional expense. If AKPS is dends using the weighted average number of sources and deposit relationships as situations unable to expand its order backlog or obtain shares outstanding during the year after warrant. financing for building additional vessels, it would deduction of the average number of treasury be challenging for AKPS to continue as a going shares held over the period. The calculation of Liquidity risk concern. As of the date of this report, AKPS has diluted earnings per share is consistent with the Liquidity risk is the risk that the Group will signed an agreement with Philadelphia Shipyard calculation of basic earnings per share while giv- encounter difficulty in meeting the obligations Development Corporation (PSDC) which provides ing effect to all dilutive potential ordinary shares associated with its financial liabilities that are a basis for AKPS to build its next two product that were outstanding during the period. The settled by delivering cash or another financial tankers. Group currently has no potentially dilutive shares asset. The Group’s approach to managing liquid- outstanding. ity is to ensure, as far as possible, that it will Accounting for derivative financial always have sufficient liquidity to meet its instruments and hedging activities EVENTS AFTER THE BALANCE SHEET DATE liabilities when due, under both normal and Derivative financial instruments are recognized A distinction is made between events both favor- stressed conditions. initially and in subsequent periods on the balance able and unfavorable that provide evidence of With regards to making the debt service sheet at fair value. AMSC currently has no conditions that existed at the balance sheet date payments on the BNP loan, the Group has estab- derivative instruments that qualify for hedge (adjusting events) and those that are indicative of lished cash retention accounts whereby all char- accounting under IFRS. conditions that arose after the balance sheet ter hire payments are deposited and utilized for Changes in the fair value of any derivative date (non-adjusting events). Financial statements debt service prior to being available for general instruments that do not qualify for hedge will only be adjusted to reflect adjusting events corporate purposes. accounting under IFRS are recognized immedi- and not non-adjusting events (although there are AMSC is subject to a covenant in its bond ately in the income statement. disclosure requirements for such events). See obligation that requires the Company to maintain In accordance with its treasury policy, the note 24. a minimum level of USD 140.0 million of con- Group does not hold or issue derivative financial solidated equity adjusted for cumulative unreal- instruments for trading purposes. However, RECENTLY ISSUED ACCOUNTING ized gains and losses on interest rate swap derivatives that do not qualify for hedge account- STANDARDS AND PRONOUNCEMENTS agreements (see note 16). A default on this ing are accounted for as trading instruments. A number of new standards, amendments to covenant triggers a cross default on all the Estimates of the fair value of foreign cur- standards and interpretations are effective for Company’s credit facilities. Consolidated equity rency contracts and interest rate swaps are annual periods beginning after 1 January 2010 for the Company is primarily impacted through obtained from a third party, with an adjustment and have been applied in preparing the Group’s the results of its operations and through the for- for the Company’s credit risk as described in consolidated financial statements. None of these eign currency translation impact of its Norwegian note 11. The fair value of derivative long-term changes have a significant effect on the Group’s Kroner (NOK) denominated bond. If the NOK financial liabilities is disclosed in note 20 regard- consolidated financial statements. AMSC has not significantly strengthens (greater than 7% based ing financial instruments. adopted any new accounting standards and on 31 December 2010 USD/NOK exchange rate) pronouncements effective for annual periods or if the results of operations are significantly beginning after 1 January 2011.

16 American Shipping Company annual report 2010 Performance 2010 Group accounts

Ⅵ Note 2: Wages and other personnel expenses

Wages and other personnel expenses consist of:

Amounts in USD thousands 2010 2009 Wages 431 901 Social security contributions 22 38 Pension costs (see note 18) 7 9 Other expenses 34 48 Total expense 494 996 Average number of employees 2 4 Number of employees at year-end 2 3

Ⅵ Note 3: Other operating expenses

Other operating expenses consist of:

Amounts in USD thousands 2010 2009 Rent and leasing expenses 99 108 Transfer of long lead items - 3 520 Other operating expenses 1 742 4 550 Total other operating expenses 1 841 8 178

The transfer of long lead items relates to the transfer of assets to Aker Philadelphia Shipyard as part of the settlement with OSG and AKPS in 2009 (see note 23). Other operating expenses primarily relate to selling, general and administrative expenses including legal and outside consulting costs and fees to auditors for the American Shipping Company ASA Group. Audit fees were as follows:

Amounts in USD thousands 2010 2009 Audit fee 136 123 Total 136 123

Ⅵ Note 4: Financial items and other gain

Amounts in USD thousands 2010 2009 Other gain Gain on sale of shipbuilding contract 12 175 11 215

Financial income Interest income 728 615 Change in mark to market value of interest rate swaps - 21 626 Financial income 728 22 241

Financial expenses Interest expense (51 910) (43 487) Interest capitalized on vessels 5 538 7 930 Net foreign exchange gain/(loss) 2 058 (8 823) Change in mark to market value of interest rate swaps (16 782) - Other financial expenses (4 147) (7 886) Financial expenses (65 243) (52 266)

NET FINANCIAL ITEMS AND OTHER GAIN (52 340) (18 810)

As a result of finalizing the Settlement Agreement in 2009, the Company sold its shipbuilding contracts for the two shuttle tankers for USD 35.0 million each. The Company’s cost basis in the second shuttle tanker, delivered in Q4 2010, was USD 22.8 million and it recorded a gain on the sale of USD 12.2 million in 2010. The Company’s cost basis in the first shuttle tanker, delivered in Q4 2009, was USD 23.8 million and it recorded a gain on the sale of USD 11.2 million in 2009 (see note 23).

Interest income in 2010 includes income on bank deposits of USD 0.1 million and interest accreted on the DPO receivable from OSG (see note 7) of USD 0.6 million. Interest income in 2009 includes income on bank deposits of USD 0.2 million, interest accreted on the DPO receivable from OSG of USD 0.2 million and accrued interest on a note receivable from Aker ASA (see note 10) of USD 0.2 million.

American Shipping Company annual report 2010 17 Performance 2010 Group accounts

The Company has interest rate swaps, related to its take-out financing, with BNP Paribas (“BNP”, formerly Fortis Capital Corp). Estimates of the fair value of the interest rate swaps are obtained from a third party, with an adjustment for the Company’s credit risk as described in note 11.

Interest expense in 2010 includes interest paid to BNP of USD 38.5 million, accrued interest relating to the NOK denominated bond of USD 11.4 million and accrued interest relating to the USD 20.0 million loan from Converto Capital Fund AS (“Converto”, formerly named Aker Capital Fund AS) of USD 2.0 million. Interest expense in 2009 includes interest paid to BNP of USD 32.5 million, accrued interest relating to the NOK denominated bond of USD 10.9 million and accrued interest relating to the USD 20.0 million loan from Converto of USD 0.1 million.

Capitalized interest relates to the prepayments made to AKPS (see note 8). Interest is capitalized at a rate equal to the interest rate on the NOK denominated bond, which is the Norwegian Inter Bank Offered Rate (NIBOR) plus 4.75% (7.26% as of 31 December 2010).

Net foreign exchange gain in 2010 includes a USD 2.1 million unrealized gain on the NOK denominated bond (see note 16). Net foreign exchange loss in 2009 includes a USD 27.2 million unrealized loss on the NOK denominated bond, partially offset by a USD 0.4 million gain on the NOK cash balance and a USD 18.0 million gain on foreign exchange contracts.

Other financial expenses in 2010 include USD 4.1 million for amortization of lending fees. Other financial expenses in 2009 include USD 4.5 million for lender and guarantor fees associated with finalizing the settlement agreement (see note 23) and USD 3.4 million for amortization of lending fees.

Ⅵ Note 5: Tax

INCOME TAX EXPENSE Recognized in the income statement

Amounts in USD thousands 2010 2009 Current tax expense/(benefit): Current year - (247) Total current tax expense/(benefit) - (247)

Deferred tax expense: Origination and reversal of temporary differences - - Total deferred tax expense - - Total income tax expense/(benefit) in income statement - (247)

Reconciliation of effective tax rate

Amounts in USD thousands 2010 2009 Loss before tax (20 534) (1 553) 28.0% 28.0% Expected tax benefit using nominal Norwegian tax rate of 28% (5 750) (435) Effect of differences between nominal Norwegian tax rate and U.S. federal and state tax rate (2 208) 1 748 Foreign exchange (131) 3 384 Tax losses used in the current year for which no deferred income tax asset was previously recognised - (6 377) Tax losses for which no deferred income tax asset was recognized 7 385 1 414 Other differences 704 19 Total income tax expense/(benefit) in income statement - (247)

DEFERRED TAX ASSETS AND LIABILITIES Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority, which through 31 December 2010 for the Group was primarily the U.S., the Commonwealth of Pennsylvania and the City of Philadelphia.

Deferred assets have not been recognized in respect of the following items The Group has net operating losses carryforwards as of 31 December 2010 of USD 182.3 million in the U.S. and USD 27.8 million in Norway. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit in the short term will be available against which the Group can utilize the benefits therefrom. In addition, no deferred tax assets have been established for unrealized net losses on derivative financial instruments of USD 95.8 million.

On 6 June 2008, American Tanker, Inc. (ATI, formerly known as Aker American Shipping, Inc.) and Subsidiaries experienced a change of control in the U.S. as defined by Internal Revenue Code due to the sale of shares from Aker ASA to SEB Enskilda. Net operating losses carryforwards at that date are expected to be available for use under the tax laws.

One of the Company’s subsidiaries is currently under audit by the Internal Revenue Service for the years ended 31 December 2008 and 31 December 2009. The Company does not anticipate any adjustments resulting from the audit.

18 American Shipping Company annual report 2010 Performance 2010 Group accounts

Ⅵ Note 6: Property, plant and equipment

Movements in property, plant and equipment for 2010 are shown below:

Amounts in USD thousands Ships Under construction Total Cost balance at 1 January 2010 750 749 5 428 756 177 Purchases 159 981 4 380 164 361 Reclassification from other long term assets 56 660 (6 660) 50 000 Cost balance at 31 December 2010 967 390 3 148 970 538

Depreciation at 1 January 2010 52 279 - 52 279 Depreciation charge for the year 34 177 - 34 177 Depreciation at 31 December 2010 86 456 - 86 456

Book value at 31 December 2010 880 934 3 148 884 082

Movements in property, plant and equipment for 2009 are shown below:

Amounts in USD thousands Ships Under construction Total Cost balance at 1 January 2009 536 764 8 411 545 175 Purchases 165 508 8 391 173 899 Reclassification from other long term assets 48 477 (6 307) 42 170 Disposals - (3 817) (3 817) Transfer to assets held for sale - (1 250) (1 250) Cost balance at 31 December 2009 750 749 5 428 756 177

Depreciation at 1 January 2009 24 347 - 24 347 Depreciation charge for the year 27 932 - 27 932 Depreciation at 31 December 2009 52 279 - 52 279

Book value at 31 December 2009 698 470 5 428 703 898

Depreciation period 25 years Depreciation method straight-line

Secured property, plant and equipment At 31 December 2010 vessels with a carrying amount of USD 880.9 million are subject to a registered debenture to secure bank loans (see note 16).

The BNP credit facility is secured by, among other things, a first preferred mortgage on each of the first 10 product tankers, which is granted when such vessel is delivered, and a blanket lien on substantially all assets of the owners of those vessels. In addition, the BNP credit facility is secured by collateral assignments of the earnings and bareboat charters for those vessels (and certain related guarantees of those bareboat charters and related supplemental indemnifications by OSG), and collateral assignments of the shipbuilding contracts and insurances for each of the first 10 product tankers, which are granted when such vessel is delivered.

As of 31 December 2010, AMSC is contractually obligated to purchase one tanker at USD 103.675 million, plus a fixed escalation as defined in the agreement with AKPS.

Property, plant and equipment under construction The total of USD 3.1 million asset under construction includes capitalized interest on milestone payments for vessels under construction.

Disposals in 2009 include USD 3.3 million in capitalized interest and other capitalized costs related to the shuttle tanker shipbuilding contract, which was sold in connection with the Settlement Agreement. The remaining USD 0.5 million is capitalized interest related to the deposits for long lead items made to AKPS for the first two option vessels. The title to those deposits were transferred to Aker Philadelphia Shipyard in connection with the Settlement Agreement. See note 23 for further details.

Ⅵ Note 7: Interest-bearing long-term receivables

Financial interest-bearing long-term receivables consist of the following items:

Amounts in USD thousands Interest rate 2010 Interest rate 2009 Other interest-bearing long-term receivables 6.06% 11 706 6.06% 7 341 Total 11 706 7 341

American Shipping Company annual report 2010 19 Performance 2010 Group accounts

Other interest-bearing long-term receivables relate to a deferred principal obligation. Pursuant to the current charter and financing agreements, OSG America L.P. has the right to defer payment of a portion of the bareboat charter hire for the first five vessels during the initial seven year fixed bareboat charter periods. OSG America L.P. will pay a reduced bareboat charter rate and assume the deferred principal obligation (DPO). The DPO accrues on a daily basis to a maximum liability of USD 7.0 million per vessel subject to adjustments as defined in the agreements. The DPO during the initial seven year period is discounted. After the initial seven years, the DPO is repaid over 18 years including interest unless the bareboat charter is terminated earlier at which time the DPO becomes due immediately. Interest accreted to the receivable in 2010 was USD 0.6 million (USD 0.2 million in 2009).

Ⅵ Note 8: Other non-current assets

Other non-current assets consist of the following items:

Amounts in USD thousands 2010 2009 Deposits for ships 24 711 74 711 Total 24 711 74 711

Deposits for ships in 2010 include milestone payments for one vessel which the company has committed to purchase from AKPS. In 2009, deposits included milestone payments for three vessels which the company had committed to purchase from AKPS, of which two vessels were delivered in 2010.

Ⅵ Note 9: Assets held for sale

Amounts in USD thousands 2010 2009 Property, plant and equipment - 1 250 Deposits for ships - 20 000 Total - 21 250

In connection with the Settlement Agreement with OSG (see note 23 for further details), the Company sold its shipbuilding contract for the shuttle tanker which was delivered in the fourth quarter of 2010.

Ⅵ Note 10: Trade and other receivables

Trade and other receivables consist of the following items:

Amounts in USD thousands 2010 2009 Advance payments to suppliers 324 392 Other short-term interest-free receivables - 609 Total 324 1 001

Advance payments to suppliers as of 31 December 2010 and 2009 include prepaid fees and deferred costs.

Other short-term interest-free receivables in 2009 are mainly from OSG and AKPS.

Ⅵ Note 11: Derivative financial assets and liabilities

Derivative financial assets and liabilities comprise the following items:

Amounts in USD thousands 2010 2009 Fair value of interest rate swaps 95 758 78 976 Derivative financial liabilities 95 758 78 976

In connection with the BNP loan, interest rate swap agreements were entered into in 2007 and as of 31 December 2010 and 2009 the market value was negative USD 95.8 million and negative USD 79.0 million, respectively. The fair value of the interest swaps is obtained from a third party. In accordance with IAS 39, the Company considered the impact its own credit risk would have on the valuation in the market. It therefore adjusted the risk-free discount rate to include a credit spread of 400 basis points at 31 December 2010 and 2009. The result of the credit spread differential had a positive impact of USD 6.6 million on the fair value of interest rate swaps at 31 December 2010 and USD 5.1 million in 2009.

20 American Shipping Company annual report 2010 Performance 2010 Group accounts

Ⅵ Note 12: Cash on deposit with banks

Cash on deposit with banks comprise the following items:

Amounts in USD thousands 2010 2009 Cash and bank deposits 21 173 20 481 Cash held for specified uses 19 665 12 076 Cash and cash equivalents 40 838 32 557

Non-current cash held for specified uses 46 004 25 226

Total cash on deposit with banks 86 842 57 783

Cash on deposit with banks is invested for varying periods of between one day and three months depending on the immediate cash requirements of AMSC, and earn interest at the respective short-term deposit rates.

Portions of the cash received in connection with the Settlement Agreement with OSG (see note 23), including the funds received from the sale of the shuttle tanker shipbuilding contracts and the funds received under the subordinated loan (see note 16), are held for specified uses in accordance with the Settlement Agreement. Cash held for specified uses can be used to pay any remaining deposits and final purchase price payments for the ten product tankers, debt service requirements, selling, general and administrative expenses (subject to a maximum of USD 1.0 million per quarter), tax expenses, and prepayments of the BNP loan (see note 16).

Ⅵ Note 13: Earnings per common share

Basic and diluted Basic and diluted earnings/(loss) per share are calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares.

Amounts in USD thousands (except share and per share data) 2010 2009 Profit/(loss) for the period (20 534) (1 306) Dividends paid on preferred shares in subsidiary - (941) Profit/(loss) attributable to equity holders of the Company for the period for determination of earnings per share (20 534) (2 247)

Weighted average number of ordinary shares in issue 27 600 000 27 600 000

Basic and diluted earnings/(loss) per share (0.74) (0.08)

There were no potentially dilutive securities outstanding as of 31 December 2010 and 2009.

Ⅵ Note 14: Paid in capital

The current authorized and issued share capital of AMSC is 27 600 000 ordinary shares, each with a par value of NOK 10 (USD 1.54 at an exchange rate of NOK/USD 6.50), fully paid. No common shares were issued in 2010 or 2009.

The changes in equity are:

Common shares of equity holders of the parent Total paid in capital Share Share attributable to Preferred shares Total Amounts in USD thousands Capital premium holders of the parent in a subsidiary paid in equity 1 January 2009 42 462 137 946 180 408 20 000 200 408

Redemption of preferred shares by subsidiary - - - (20 000) (20 000)

31 December 2009 42 462 137 946 180 408 - 180 408

31 December 2010 42 462 137 946 180 408 - 180 408

There were 3,500 preferred shares authorized in 2008 by a subsidiary of AMSC, of which 500 were issued. The 500 issued preferred shares were non- dilutive, redeemable preferred shares with a par value of USD 40,000 per share that were issued to Aker ASA. The preferred stock was redeemable only at the option of AMSC and holders had no voting rights. Dividends on the preferred shares are declared only at the Company’s discretion equal to 5% annually and are payable in arrears. In the first quarter of 2009, the subsidiary declared and paid a dividend of USD 0.9 million on the preferred stock (USD 1,882 per share) and then redeemed all of the outstanding preferred shares.

American Shipping Company annual report 2010 21 Performance 2010 Group accounts

Ⅵ Note 15: Group entities

The largest subsidiaries included in the American Shipping Company ASA’s Group account were as follows. Companies owned directly by American Shipping Company ASA are highlighted.

AMSC’s common AMSC’s Principal holding % voting share % place of business Country

American Tanker Holding Company, Inc. (ATHC) (1) 100% 100% Philadelphia, PA USA American Tanker, Inc. (ATI) 100% 100% Philadelphia, PA USA American Shipping Corporation (ASC) 100% 100% Philadelphia, PA USA American Tanker II, Inc. (ATI II) 100% 100% Philadelphia, PA USA American Shipping Corporation II (ASC II) 100% 100% Philadelphia, PA USA American Tanker III, Inc. (ATI III) (2) 100% 100% Wilmington, DE USA American Shuttle Tanker, LLC (AST) 100% 100% Philadelphia, PA USA

1) ATHC was formed in 2009 and is now the holder of shares of ATI and ATI II, previously owned directly by AMSC. 2) This entity issued non-dilutive, non-voting shares of redeemable preferred stock in 2008 which were redeemed in 2009 (see note 14).

Restrictions on dividend payments Subject to certain exceptions, the BNP credit agreement restricts the payment of dividends by American Shipping Company ASA (“AMSC”) and American Shipping Corporation (“ASC”). Specifically, AMSC may pay dividends only if it has a Fixed Charge Coverage Ratio of at least 1.1:1.0 for the most recent 12-month period and satisfies certain other requirements. In that case, it may pay a dividend of up to 50 percent of Net Cash Earnings for the most recent 12-month period provided that it also either (i) makes an equal prepayment on the BNP loan or (ii) deposits an equal amount in an account pledged to the lenders as additional collateral for the BNP loan. ASC may pay dividends only if it has a Fixed Charge Coverage Ratio of at least 1.05:1.0 for the most recent 12-month period and satisfies certain other requirements. Dividends may be paid by the leasing companies to ASC and by American Tanker, Inc. (“ATI”) to AMSC.

Subject to certain exceptions, the BNP Credit Agreement prohibits ATI and its subsidiaries from lending money, or making investments in other entities, including their affiliates. ATI may, however, make capital contributions to ASC, and ASC may make capital contributions to the leasing companies. These restrictions do not apply to AMSC.

Subject to certain exceptions, the BNP credit agreement prohibits ATI and its subsidiaries from incurring additional indebtedness other than intercompany loans from AMSC that are due prior to the maturity date of the BNP loan and are not fully subordinated to the BNP loan. The BNP credit agreement prohibits ATI and its subsidiaries from making any prepayment on any indebtedness (other than the BNP loan), including any prepayment on subordinated indebtedness owing to AMSC. These restrictions do not apply to AMSC.

Ⅵ Note 16: Interest-bearing loans and liabilities

This note provides information about the contractual terms of AMSC’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 20.

Amounts in USD thousands 2010 2009 Non-current liabilities Secured loans 611 906 496 296 Unsecured bond issues 167 101 157 640 Subordinated loan from Converto Capital Fund AS 21 973 20 000 Total long term interest bearing loans 800 980 673 936

Current liabilities Current portion of secured loans 44 838 31 803 Total interest-bearing short term debt 44 838 31 803

Secured Loans as of 31 December Maturities 2010 2009 BNP Paribas gross borrowings 2014-2016 672 015 546 619 Less unamortized loan fees (15 271) (18 520) Sum Secured Loans 656 744 528 099

During 2010, the Fortis credit facility and related interest swap agreements were assigned to BNP Paribas as part of the purchase of Fortis by BNP. In addition, the cash retention accounts (where the bareboat charter payments are deposited and utilized for debt service payments) were moved from Fortis, Netherlands to BNP Paribas in New York.

American Shipping Company has secured long-term take-out financing of USD 770 million for ten product tankers with BNP. The facility is structured so that upon delivery of each vessel, AMSC will draw down approximately USD 80 million with partial repayment to BNP over the initial fixed bareboat charter period.

22 American Shipping Company annual report 2010 Performance 2010 Group accounts

In connection with the BNP facility, AMSC has entered into interest rate swap agreements which, in effect, locks in the interest rate AMSC pays to BNP. The fixed interest rates vary between 6.1 percent and 7.5 percent per annum.

Unsecured bond issue as of 31 December Maturity 2010 2009 Bond issue 2012 114 170 114 170 Interest added to bonds outstanding 47 264 36 051 Cumulative foreign currency impact 6 046 8 124 Less unamortized loan fees (379) (705) Sum Unsecured bond issue 167 101 157 640

On 16 February 2007 AMSC issued a NOK 700 million bond. The interest rate on the bond is NIBOR plus a margin of 4.75%. AMSC has the option to make any of the interest payments for the loan term as payment-in-kind (PIK) where the interest is added to the principal. AMSC also has the option to call the bond, or parts of the bond, at certain dates. The first call date was August 2009 at a call price of 104.75% of par. The second call date was August 2010 at a call price of 103.75% of par. The Company has not redeemed any parts of the bond as of 31 December 2010. The Company has elected PIK interest for all of its interest periods to date.

The bond, along with any PIK interest is due in full in February 2012. As of 31 December 2010, the bond loan balance including PIK interest is NOK 977.7 million (NOK 909.9 million as of 31 December 2009). Prior to the maturity date, the Company plans to refinance or request an extension from the bondholders. If the Company is unable to refinance or extend the bond on terms favorable to the Company, it will create significant liquidity risk.

The covenants on the Company’s NOK denominated bond require that consolidated equity excluding cumulative unrealized gains and losses on the interest rate swaps be maintained at a level not less than USD 140 million at a quarterly measurement date.

As of 31 December 2010, consolidated shareholders equity for determining compliance with debt covenants was approximately USD 154.0 million. See note 20 for an analysis of how foreign currency fluctuations could impact consolidated equity.

Subordinated loan from Converto Capital Fund AS Maturity 2010 2009 Principal amount 2017 20 000 20 000 Interest added to principal 1 973 - Sum Subordinated Loan 21 973 20 000

In connection with the Settlement Agreement with OSG (see note 23), Converto Capital Fund AS has issued a USD 20.0 million loan to the Company. The loan is subordinated to the BNP Credit Agreement, as well as any potential obligations and liabilities due to OSG and any potential liability associated with AKPS’s construction financing which contains a put option to AMSC. The loan bears interest at the higher of 9.5% or LIBOR plus 5.75% (9.5% at 31 December 2010). Interest is payment in kind until certain conditions are met. It is expected that cash interest will not be paid in the next three years. The loan matures on 11 December 2017.

Ⅵ Note 17: Operating leases

Non-cancellable operating lease rentals are payable as follows:

Amounts in USD thousands 2010 2009 Less than one year 64 61 Between one and five years 83 129 More than five years - - Total 147 190

In 2007 AMSC signed a lease for office space in Philadelphia, Pennsylvania through March 2013.

The Company has non-cancellable bareboat charter lease agreements with its customers, OSG Shipholding Group and OSG America LP, for periods of up to 10 years. The non-cancellable bareboat charter revenue backlog totals approximately USD 383.3 million as of 31 December 2010.

Ⅵ Note 18: Pensions

Pension expense recognised in the income statement:

Amounts in USD thousands 2010 2009 Contribution plans (employer’s contribution) 7 9 Total net pension expense 7 9

The Group has a defined contribution plan for its employees which provides for a contribution based upon a fixed matching amount plus discretionary percentage of salaries. This expense is included in wages and other personnel expenses in the income statement.

American Shipping Company annual report 2010 23 Performance 2010 Group accounts

Ⅵ Note 19: Trade and other payables

Trade and other payables comprise the following items:

Amounts in USD thousands 2010 2009 Trade accounts payable 58 24 Accrual of financial costs 1 197 1 033 Other short-term interest free liabilities 7 047 1 655 Total 8 302 2 712

Other short-term interest free liabilities at 31 December 2010 include deferred revenue of USD 6.2 million and guarantees and other accrued costs of USD 0.8 million. Other short-term interest free liabilities at 31 December 2009 include deferred revenue of USD 0.6 million and guarantees and other accrued costs of USD 1.1 million.

Ⅵ Note 20: Financial instruments

Exposure to credit, interest rate and currency risk arises in the normal course of the Group’s business. Derivative financial instruments are used from time to time to hedge exposure to fluctuations in foreign exchange rates and interest rates for business purposes.

Credit risk The carrying amount of financial assets represents the maximum credit exposure.

At 31 December the maximum exposure to credit risk is as follows:

Amounts in USD thousands 2010 2009 Deposits 24 711 74 711 Loans and receivables 12 030 8 342 Cash and cash equivalents 21 173 20 481 Cash held for specified uses (current and non-current) 65 669 37 302 Total 123 583 140 836

AMSC regularly monitors the financial health of the financial institutions which it uses for cash management services and in which it makes deposits and other investments. AMSC responds to changes in conditions affecting its deposit relationships as situations warrant.

Receivables are to be collected from the following types of counterparties:

Amounts in USD thousands 2010 2009 Type of counterparty: End-user customer (1) 11 706 7 700 Other receivables 324 642 Total 12 030 8 342

1) Due to the nature of the Group’s operations, revenues and related receivables, including the DPO, are currently concentrated amongst two parties.

Liquidity risk The following are the contractual maturities of financial liabilities including interest payments:

31 December 2010 Contractual 6 mths More than Amounts in USD thousands Book value cash flow and less 6-12 mths 1-2 years 2-5 years 5 years Non-derivative financial liabilities Unsecured bond issues (gross) 167 480 (182 657) - - (182 657) - - Long-term interest bearing external liabilities (gross) 693 988 (868 975) (44 056) (44 355) (88 073) (650 022) (42 469)

Derivative financial liabilities Interest rate swaps 95 758 (104 183) (17 978) (18 834) (31 613) (35 758) -

Total as of 31 December 2010 957 226 (1 155 815) (62 034) (63 189) (302 343) (685 780) (42 469)

24 American Shipping Company annual report 2010 Performance 2010 Group accounts

31 December 2009 Contractual 6 mths More than Amounts in USD thousands Book value cash flow and less 6-12 mths 1-2 years 2-5 years 5 years Non-derivative financial liabilities Unsecured bond issues (gross) 158 345 (185 105) - - - (185 105) - Long-term interest bearing external liabilities (gross) 566 619 (728 305) (32 530) (33 736) (67 431) (440 787) (153 821)

Derivative financial liabilities Interest rate swaps 78 976 (76 951) (15 463) (15 582) (21 579) (23 766) (561)

Total as of 31 December 2009 803 940 (990 361) (47 993) (49 318) (89 010) (649 658) (154 382)

Currency risk The Group incurs foreign currency risk on purchases and borrowings that are denominated in a currency other than USD. The currency giving rise to this risk is primarily NOK.

Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognized in the income statement. Both the changes in fair value of the forward contracts and the foreign exchange gains and losses relating to the monetary items are recognized as part of "net financing costs" (see note 4). The Company did not have any exchange contracts at 31 December 2010 or 31 December 2009.

Exposure to currency risk The company’s exposure to currency risk at 31 December 2010 and 2009 primarily related to amounts denominated in NOK, as follows:

Amounts in USD thousands 2010 2009 Gross balance sheet exposure Trade payables (-) (43) (7) Bond (167 101) (157 640) Cash 58 392 Gross balance sheet exposure (167 086) (157 255) Estimated forecast expenses (-) (475) (510) Gross forecasted exposure (475) (510) Forward exchange contracts - - Net exposure (167 561) (157 765)

In addition to the above, at 31 December 2010 we expect to incur NOK-denominated PIK interest (non-cash) of approximately USD 13.7 million in 2011.

Sensitivity analysis In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group's earnings. Over the longer term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings.

It is estimated that a general strengthening of ten percent in the value of the USD against the NOK would have increased the Group's profit before tax by approximately USD 16.4 million for the year ended 31 December 2010 and approximately USD 4.7 million for the year ended 31 December 2009. This analysis assumes that all other variables remain constant.

AMSC is subject to a covenant in its bond obligation that requires the Company to maintain a minimum level of USD 140.0 million of consolidated equity (see note 16). Consolidated equity for the Company is primarily impacted through the results of its operations and through the foreign currency translation impact of its Norwegian Kroner (NOK) denominated bond. If the NOK significantly strengthens (greater than 7% based on 31 December 2010 USD/NOK exchange rate) or if the results of operations are significantly negatively different from what the Company projects, the risk of failing the covenant will increase accordingly. The Company monitors the USD/NOK foreign exchange rate and its impact on the bond covenant daily. As of 31 December 2010, a foreign exchange rate of 5.39 NOK/USD would have caused a breach in the minimum consolidated equity covenant (the actual rate at 31 December 2010 was 5.84 NOK/USD).

Exposure to interest rate risk Sensitivity analysis An increase of 100 basis points in interest rates in the reporting year would have increased /(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant.

Amounts in USD thousands 2010 2009 Increase/(decrease) Bank deposits 647 493 Other financial assets - 53 Financial liabilities (1 575) (1 431) Interest swap 24 568 30 780 P&L sensitivity (net) 23 640 29 895

For 2010 and 2009, estimates of the interest swap valuation following the change in interest rates are obtained from a third party, with an adjustment for the Company's credit risk as described in note 11.

American Shipping Company annual report 2010 25 Performance 2010 Group accounts

Fair values The fair values of financial instruments together with the carrying amounts shown in the balance sheet as of 31 December are as follows:

Amounts in USD thousands Carrying amount 2010 Fair value 2010 Carrying amount 2009 Fair value 2009 Interest-bearing loans to external companies, maturity greater than 3 years 11 706 13 656 7 341 8 904 Interest swap used for hedging: Liabilities (95 758) (95 758) (78 976) (78 976) Cash on deposit with banks 86 842 86 842 57 783 57 783 Unsecured bond issue (gross) (167 480) (100 488) (158 345) (102 925) Secured loans (gross) (672 015) (645 684) (546 619) (499 169) Subordinated loans (gross) (21 973) (21 973) (20 000) (20 000) The fair value of the interest-bearing loans to external companies is calculated based on the present value of the gross principal balance, discountedata market rate of 2.0% in both 2010 and 2009.

The fair value of the unsecured bond issue was obtained from a third party.

The fair value of fixed interest long-term debt is calculated based on the present value of future principle and interest cash flows, discounted at the market rate of 2.3% for 2010 and 2.25% for 2009.

In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Fair value hierarchy IFRS requires companies to disclose certain information about how fair value is determined in a “fair value hierarchy” for financial instruments recorded at fair value, which for AMSC are derivative financial instruments. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 includes assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly.

The only financial instruments that the Company accounts for at fair value are the interest rate swaps as of 31 December 2010 and 2009, which are classified in the Level 2 category described above.

Ⅵ Note 21: Shares owned or controlled by the President and Chief Executive Officer, Ⅵ Board of Directors and senior employees of the American Shipping Company Group

Shares in American Shipping Company ASA of 31 December 2010

Name Position Company No. of shares Dag Fasmer Wittusen Board Member AMSC 10 000 There is no share option agreement between American Shipping Company ASA and senior management or Directors.

Remuneration to the Board of Directors through 31 December 2010

Name Position Company Remuneration Annette Malm Justad Chairman AMSC 38 057 Robert N Caruso Chairman-former AMSC - John Rose Board Member AMSC - Dag Fasmer Wittusen Board Member AMSC 44 917 Mavis Hawkes Board Member-former AMSC 28 517 Sum Directors’ fee 111 491

The Chairman and the Board of Directors have not received benefits other than Directors' fees except John Rose and Robert Caruso. Mr. Rose and Mr. Caruso had agreed to forego their board compensation and receive a fee for consulting services through John Rose Associates and B/3 Management Resources, respectively. Mr. Rose received USD 48,000 in 2010. Mr. Caruso received USD 59,000 in 2010. In accordance with the Company's corporate governance, the arrangements with John Rose and Bob Caruso have been approved by the full Board of Directors. The Board of Director's term runs from 1 April through 31 March and the above remuneration reflects cash payments to board members during the calendar year 2010.

At the Annual General Meeting in 2010, it was voted and approved that the Company would have only three board members. At that time, Robert Caruso and Mavis Hawkes resigned from the Board of Directors. Also at that time, Annette Malm Justad was elected as Chairman of the Board.

Remuneration to the nomination committee AMSC's nomination committee members withdrew their membership on 25 June 2008 and no new nomination committee has been elected.

26 American Shipping Company annual report 2010 Performance 2010 Group accounts

Guidelines for remuneration to the President and CEO and members of the executive team The basis of the remuneration of the President and CEO has been developed in order to create a performance-based system which is founded on the Company’s values. This system of reward is designed to contribute to the achievement of good financial results and increase in shareholder value.

Effective 31 December 2009, Robert K. Kurz resigned from his position as President and CEO, and is no longer employed by the Company. Coinciding with Mr. Kurz's resignation, board member John Rose assumed the position of General Manager on an interim basis. On 18 January 2010, the Board of Directors announced the appointment of Gregory J. Matecki as its new President and CEO. Mr. Matecki is the Company's Chief Financial Officer and will continue to hold that position. Mr. Matecki also assumed the role of General Manager upon regulatory approval, which was received in 2010.

The CEO receives a base salary. In addition, a variable pay is awarded. This variable pay is based on the achievement of financial and personal performance targets in accordance with the Company’s values.

The variable pay program represents a potential for an additional variable pay of between 25 and 150 percent of base salary depending on the achievement of defined performance targets.

The President and CEO participates in the standard pension and insurance schemes applicable to all employees. The Company practices standard employment contracts and standard terms and conditions regarding notice period and severance pay for the President and CEO.

The Company does not offer share option programs to executive managers.

Remuneration to senior management during 2010

Pension Base salary Bonus Other Benefits Contribution Total (USD) Severance pay Gregory J. Matecki Jan - Dec 265 965 46 350 13 250 6 505 332 070 12 months

Remuneration to senior management during 2009

Pension Base salary Bonus Other Benefits Contribution Total (USD) Severance pay Robert K. Kurz Jan - Dec 370 800 186 136 24 364 3 263 584 563 12 months Gregory J. Matecki Jan - Dec 231 750 24 881 13 813 5 382 275 826 12 months

Ⅵ Note 22: Transactions, guarantees and agreements with related parties

The ultimate parent company of American Shipping Company ASA prior to 6 June 2008 was Aker ASA. As of 6 June 2008, Aker ASA sold its majority ownership in AMSC. Except as described elsewhere, the Company believes that related party transactions are made on terms equivalent to those that prevail in arm's length transactions. All payables are paid within the normal course of business.

Transactions The Group has service agreements with Aker ASA, AKPS and Resource Group International which provide certain specified accounting, financial and administrative services. The agreement with AKPS also included shared services of legal counsel for part of the year 2009. Upon Aker ASA's sale of its majority ownership in the Company in 2008, Aker ASA and its subsidiaries are no longer related parties. The cost of these services was not material, however they are important to the Company's operations.

Ⅵ Note 23: Guarantees and other material transactions

The Company has made the following guarantees:

Description Beneficiary Amount (USD thousands) Guarantee party

Construction loan facility Caterpillar Financial Services Corp. 150 000 (1) Aker Philadelphia Shipyard, Inc. Capital expenditure facility PIDC Regional Center L.P. XV 20 000 (2) Aker Philadelphia Shipyard, Inc. Counter guarantee Aker Maritime Finance AS 20 000 (3) Aker Philadelphia Shipyard, Inc.

1) The construction loan facility is provided by Caterpillar Financial Services Corp. (CFSC) to AKPS for the construction of the remaining tanker in the twelve ship series. In connection with this facility, AMSC and CFSC entered into a put/call agreement. In the event that an event of default occurs and is continuing under the construction loan facility, CFSC may "put" the entire facility to AMSC, whereupon AMSC would be required to purchase 100% of the loans from CFSC at par plus accrued interest and unpaid expenses. The principal balance is approximately USD 16.0 million as of 31 December 2010. 2) The capital expenditure facility represents a loan from the Pennsylvania Industrial Development Corporation Regional Center, L.P. XV (Welcome Fund) to AKPS that is secured by a second mortgage against the property, plant and equipment of AKPS. This loan has a current outstanding balance of USD 20.0 million at 31 December 2010, interest is paid semi-annually and the principal is due March 2012. In connection with this facility, AMSC has agreed to guarantee the entire loan to the lender. 3) The counter guarantee relates to an agreement by AKPS to maintain minimum employment levels at the shipyard until 31 December 2014. AKPS will be required to pay liquidated damages in the event that the average number of full-time employees during a given year falls below the required minimum, subject to an aggregate cap of USD 20.0 million. This agreement is part of a Master Agreement between AKPS and the governmental parties which provided funding to the shipyard for the renovation and modernization of its facility and training of its workforce, and it is guaranteed by Aker Maritime Finance AS (as successor by merger to the former Kvaerner ASA). The counter guarantee was issued by AMSC to Aker Maritime Finance AS in connection with the organization of the AMSC Group in 2005. As part of the sale of AKPS in December 2007, AKPS issued a USD 20.0 million counter guarantee to AMSC and Aker Maritime Finance AS related to the minimum employment levels.

American Shipping Company annual report 2010 27 Performance 2010 Group accounts

The continued operations at AKPS will be dependent upon its ability to obtain new orders or financing for building additional vessels. As of the date of this report, AKPS has signed an agreement with PSDC which provides a basis for AKPS to build its next two product tankers. As a result, no liability has been recorded under the guarantees.

Other material transactions: Shipbuilding contracts with Aker Philadelphia Shipyard, Inc. AMSC had entered into shipbuilding contracts for ten product tankers in 2005. In 2007, two additional product tankers were ordered. These two additional tankers were to be converted to shuttle tankers. At the end of 2007, AMSC split from the shipbuilding operation and modified the contracts for the remaining nine tankers on order, of which six tankers have been delivered and two shipbuilding contracts were sold to OSG. The purchase price is USD 103.675 million (including construction financing). This price is subject to fixed escalation due to increases in material cost. As such, the total contract value for all nine tankers is approximately USD 933.1 million. In addition, AMSC has option agreements with AKPS to build an additional four tankers. The options expire 31 December 2011 and we do not expect that they will be exercised at this time.

Deposits made to AKPS for vessels under construction total USD 24.7 million as of 31 December 2010 for tanker ten and USD 74.7 million as of 31 December 2009 for tankers eight through ten. An additional USD 20.0 million of deposits to AKPS were classified as held for sale (see note 9) in 2009.

Other outstanding balances related to AKPS were not material.

The Company and AKPS are jointly and severally liable to Overseas Shipholding Group for breaches by them under the framework agreement and related transaction documents governing the construction and leasing of the initial ten Jones Act tankers. The Company and AKPS have entered into a cross- indemnity agreement to allocate these liabilities among themselves based on relative fault.

Settlement Agreement with Overseas Shipholding Group, Inc. and OSG America, L.P. In the fourth quarter of 2009, the Company announced that it had entered into a settlement agreement (“Settlement Agreement”) with Overseas Shipholding Group, Inc. and OSG America L.P. (collectively “OSG”) that settled all of the outstanding commercial disputes between AMSC and OSG. Aker ASA, Converto Capital Fund AS and AKPS are also parties to the Settlement Agreement. The Settlement Agreement will enable the Company to complete the twelve vessel build series with AKPS. The Settlement Agreement has received all necessary third party approvals, including approval of the Company’s senior lenders and the U.S. Coast Guard. The Settlement Agreement provides for the dismissal with prejudice of all claims in the arbitration with OSG.

As part of the Settlement Agreement, the fixed terms of the bareboat charters of the ten product tankers (nine of which have been delivered with the last tanker to be delivered before 30 September 2011) will be extended to a common expiration date that is ten years from the settlement date upon satisfaction of certain conditions including the timely delivery of the remaining vessels in the twelve ship order and the satisfactory refinancing or extension of AMSC’s vessel debt and bond obligations. Various other agreements with OSG have been modified including the elimination of exclusivity, the sale to OSG of the two shuttle tanker shipbuilding contracts and changes to the profit sharing agreement.

The shipbuilding contracts were assigned on the settlement date, the first shuttle tanker was delivered in the fourth quarter of 2009 and the second shuttle tanker was delivered in the fourth quarter of 2010. The sale of the two shuttle tanker shipbuilding contracts for USD 35.0 million each (reflecting a return of capital paid per vessel of approximately USD 20.0 million each) resolves AMSC’s inability to obtain permanent financing under the current challenging credit markets and allows AMSC to continue with the full twelve ship order. The proceeds from the sale also provide AMSC with needed liquidity to assist the Company in meeting its debt service obligations to its senior lenders. The changes to the profit sharing agreement include overall simplification of the calculations, a change to increase AMSC’s sharing percentage to fifty percent under all circumstances, and a provision allowing OSG to retain the first USD 18.2 million of profit sharing otherwise payable to AMSC (such retained profit sharing to accrue interest until paid).

In connection with the Settlement Agreement, several of AMSC’s agreements with AKPS were modified including the elimination of exclusivity, reduction of purchase prices on remaining vessels to be delivered, and cancellation of nine option agreements for tankers beyond AKPS’s hull 020. AMSC maintains four options with AKPS for product tankers.

In addition, as part of the Settlement Agreement, Converto Capital Fund AS has agreed to make an unsecured, subordinated loan of USD 20.0 million to AMSC, which will provide additional liquidity to the Company. Interest under this loan is payment in kind interest. Loan repayment restrictions apply until specific conditions are met including the timely delivery of the remaining vessels in the twelve ship order and the satisfactory refinancing or extension of AMSC’s vessel debt and bond obligations. The loan’s maturity date is three years from the date that those conditions are satisfied.

As a result of finalizing the Settlement Agreement, the Company sold its shipbuilding contracts for the shuttle tankers in the fourth quarter of 2010 and 2009, respectively for USD 35.0 million each. The Company’s cost basis in the second shuttle tanker was USD 22.8 million and recorded a gain on the sale of USD 12.2 million in 2010, shown as a separate line item below operating income (see note 4). The Company’s cost basis in the first shuttle tanker was USD 23.8 million and recorded a gain on the sale of USD 11.2 million in 2009, shown as a separate line item below operating income (see note 4).

In addition, the Company transferred title of the long lead items purchased in 2008 for the first two option vessels to AKPS. As a result of transferring title of the long lead items, the Company recorded a charge of USD 3.5 million in 2009 in other operating expenses (see note 3). The Company also took a charge of USD 4.5 million for lender and guarantor fees in 2009 (see note 4). With the Settlement Agreement, AMSC has resolved its inability to fund the purchase of the two shuttle tankers as well as the anticipated shortfall in debt service coverage on its senior debt resulting from the absence of profit sharing under the bareboat charters.

Ⅵ Note 24: Events after the balance sheet date

On 1 March 2011, AMSC held an extraordinary general meeting for the purpose of electing a new board member. John Rose resigned from his position as a director of the Board of Directors and Lars Solbakken was elected for a two year term.

AMSC has counterparty risk associated with various guarantees AMSC has given on obligations of Aker Philadelphia Shipyard, Inc, pursuant to terms under which the companies became separate legal entities in 2007. The continued operations at AKPS will be dependent upon its ability to obtain new orders or financing for building additional vessels. On 18 February 2011, the tentative agreement (signed in mid-December 2010) between AKPS and the Philadelphia Shipyard Development Corporation became effective. That agreement provides the basis for AKPS to build two additional vessels. As a result, no liability has been recorded under the guarantees.

28 American Shipping Company annual report 2010 Performance 2010 Parent company accounts

American Shipping Company ASA Statement of Financial Position as of 31 December

Amounts in USD thousands Note 2010 2009

ASSETS Shares in subsidiaries 3 321 583 287 813 Other non-current assets - - Long-term receivable group companies 5 29 923 61 535 Total financial non-current assets 351 506 349 348 Total non-current assets 351 506 349 348

Other short-term receivables 54 170 Cash and cash equivalents 8 693 1 199 Total current assets 747 1 369 Total assets 352 253 350 717

EQUITY AND LIABILITIES Share capital 42 462 42 462 Share premium reserve 137 946 137 946 Total paid in capital 180 408 180 408

Other equity (19 013) (9 120) Total retained earnings (19 013) (9 120) Total equity 6 161 395 171 288

Bond obligation 7 167 101 157 640 Other interest-bearing debt 7 21 973 20 000 Total long-term liabilities 189 074 177 640

Bond obligation 7 - - Other short-term debt 1 784 1 789 Total short-term liabilities 1 784 1 789 Total equity and liabilities 352 253 350 717

American Shipping Company annual report 2010 29 Performance 2010 Parent company accounts

American Shipping Company ASA Income Statement

Amounts in USD thousands Note 2010 2009 Operating revenues 65 106 Other operating expenses 2 (338) (673) Operating loss (273) (567)

Interest income from group companies 4 522 5 615 Other interest and financial revenues 2 091 20 240 Other interest and financial expenses 2 (16 233) (48 055) Income/(loss) after financial items (9 893) (22 767)

Taxes 4 - -

Profit/(loss) for the period (9 893) (22 767)

Allocation of net profit: Profit (9 893) (22 767) Other equity 6 9 893 22 767 Total - -

American Shipping Company ASA Statement of Comprehensive Income

Amounts in USD thousands 2010 2009 Net income/(loss) for the period (9 893) (22 767) Other comprehensive income for the period, net of tax - - Total comprehensive income for the period (9 893) (22 767)

30 American Shipping Company annual report 2010 Performance 2010 Parent company accounts

American Shipping Company ASA Cash Flow Statement

Amounts in USD thousands 2010 2009 Profit before tax (9 893) (22 767) Unrealized foreign exchange (gain)/loss and unpaid interest expense 11 433 38 603 Impairment of shares in subsidiaries 2 510 5 631 Changes in short term receivables 117 812 Changes in short term liabilities (5) (109) Cash flow from operating activities 4 162 22 169

Other changes in long term investments (4 668) (41 698) Cash flow from investing activities (4 668) (41 698)

Debt fees paid - (122) Proceeds from other interest-bearing debt - 20 000 Cash flow from financial activities - 19 878

Cash flow for the year (506) 349 Cash and cash equivalents 1 January 1 199 850 Cash and cash equivalents 31 December 693 1 199

Oslo, 18 February 2011 The Board of Directors American Shipping Company ASA

Annette Malm Justad John Rose Dag Fasmer Wittusen Chairman Board Member Board Member

Gregory J. Matecki General Manager

American Shipping Company annual report 2010 31 Performance 2010 Parent company accounts

American Shipping Company ASA: Notes to the accounts

Ⅵ Note 1: Accounting principles

The annual report is prepared according to the The bond loan is recorded at amortized cost. is calculated at 28 percent on the basis of exist- Norwegian Accounting Act and generally ing temporary differences between accounting accepted accounting principles in Norway. Trade and other receivables profit and taxable profit together with tax deduc- Trade receivables and other current receivables tible deficits at year end. Temporary differences, Subsidiaries and investment in associates are recorded in the balance sheet at nominal both positive and negative, are balanced out Subsidiaries are valued by the cost method in the value less provisions for doubtful accounts. within the same period. Deferred tax assets are company accounts. The investment is valued at recorded in the balance sheet to the extent it is the cost of acquiring shares in the subsidiary, Foreign currency translation more likely than not that the tax assets will be providing that a write down is not required. A The company’s functional currency is U.S. dol- utilized. write down to fair value will be carried out if the lars (USD). Foreign currency transactions are reduction in value is caused by circumstances translated into USD using the exchange rates Cash flow statement which may not be regarded as incidental, and prevailing at the dates of the transactions. The cash flow statement is presented using the deemed necessary by generally accepted Receivables and liabilities in foreign currencies indirect method. Cash and cash equivalents accounting principles. Write downs are reversed are translated into USD at the exchange rates includes cash, bank deposits and other short- when the cause of the initial write down is no ruling on the balance sheet date. Foreign term highly liquid deposits with original maturities longer present. exchange gains and losses resulting from the of three months or less. If dividends exceed withheld profits after settlement of such transactions and from the acquisition, the exceeding amount represents translation of monetary assets and liabilities Use of estimates reimbursement of invested capital, and the dis- denominated in foreign currencies are recog- The preparation of the financial statements tribution will be subtracted from the value of the nized in the income statement. requires management to make estimates and acquisition in the balance sheet. assumptions that affect the reported amounts in Short term investments the profit and loss statement, the measurement Balance sheet classification Short term investments (stocks, short-term of assets and liabilities and the disclosure of Net current assets comprise creditors due within bonds, liquid placements and shares) are valued contingent assets and liabilities on the balance one year. Other entries are classified as fixed at the lower of acquisition cost or fair value at the sheet date. Actual results can differ from these assets and/or long-term creditors. balance sheet date. Dividends and other dis- estimates. Current assets are valued at the lower of tributions are recognized as other investment Contingent losses that are probable and acquisition cost or fair value. Short-term cred- income. quantifiable are expensed as occurred. itors are recognized at nominal value. Certain prior year reclassifications were Fixed assets are valued at the cost of acquis- Income tax made to conform with current year presentation. ition. In the case of non-incidental reduction in Tax expenses in the profit and loss account value, the asset will be written down to the fair comprise both tax payable for the accounting value amount. Long-term creditors are recog- period and changes in deferred tax. Deferred tax nized at nominal value.

32 American Shipping Company annual report 2010 Performance 2010 Parent company accounts

Ⅵ Note 2: Other operating and financial expenses

Fees to the auditors of USD 45 thousand for ordinary audit was expensed in 2010. For more information on fees paid to KPMG, see note 3 in the consolidated accounts.

The company has no employees. The senior management is employed in the operating companies (see note 21 in the consolidated accounts). Board of directors expenses were USD 33 thousand in 2010.

Ⅵ Note 3: Shares

This item comprises the following as of 31 December 2010:

Ownership of common Voting rights Business Historical Book Amounts in USD thousands shares(%) (%) address cost value

American Tanker Holding Company, Inc. (ATHC) (1) 100% 100% Philadelphia, PA 321 204 321 204 American Tanker III, Inc. (ATI III) (2) 100% 100% Wilmington, DE 379 379 Total shares 321 583 321 583

ATHC ATI III Subsidiaries' 2010 results after tax in USD thousands (16 284) (69) Subsidiaries' equity attributable to common shareholders at 31 December 2010 in USD thousands 217 429 310

1) ATHC was formed in 2009 and is now the holder of shares of ATI and ATI II, previously owned directly by AMSC. The book value is net of USD 2.5 million in impairment charges. 2) This entity issued non-dilutive, non-voting shares of redeemable preferred stock in 2008, which were redeemed in 2009 (see note 14 in the consolidated accounts). The book value is net of USD 5.6 million impairment charges.

American Shipping Company ASA (AMSC) analyzes the value of its investments in subsidiaries on an annual basis, or sooner if conditions change or events occur which could cause the carrying values to change. Detailed analysis, including discounted cash flows and third party appraisals, are prepared and reviewed by management supporting the carrying value of each of its investments. AMSC considers many factors, including the appropriate cost of capital, asset (investment) lives, market values and likelihood of events, in reviewing its investment value. For the year ending 31 December 2010, AMSC wrote down its investment in ATHC and took a charge of USD 2.5 million. For the year ending 31 December 2009, AMSC wrote down its investment in ATI III and took a charge of USD 5.6 million.

Ⅵ Note 4: Tax

The table below shows the difference between book and tax values at the end of 2010 and 2009, and the amounts of deferred taxes at these dates and the change in deferred taxes.

Amounts in USD thousands 2010 2009 Operating loss carried forward (27 759) (20 226) Total differences (27 759) (20 226) Net deferred tax asset, 28 percent (7 773) (5 663) Restrictions regarding balance tax asset 7 773 5 663 Book value tax asset - -

Estimated result for tax purposes:

Amounts in USD thousands 2010 2009 Result before tax measured in NOK for taxation purposes (10 359) (10 683) Permanent differences for impairment on shares 2 509 5 631 Estimated result for tax purposes (7 850) (5 052) Payable current tax - -

The result before taxes in NOK are different from the result before taxes in USD primarily due to currency exchange differences.

American Shipping Company annual report 2010 33 Performance 2010 Parent company accounts

Taxes:

Amounts in USD thousands 2010 2009 Current payable tax charged to the income statement - - Change in deferred tax - - Total tax cost - -

Ⅵ Note 5: Long-term receivables

Long-term receivables are:

Amounts in USD thousands 2010 2009 American Shipping Corporation (ASC) 7 834 20 240 American Shipping Corporation II (ASC II) - 21 189 American Shuttle Tanker, LLC (AST) - - American Tanker, Inc. (ATI) 22 089 20 106 Total 29 923 61 535

The receivables have the following installment plan:

Amounts in USD thousands 2010 2009 Maturity within five years 7 834 41 429 Maturity later than five years 22 089 20 106 Total 29 923 61 535

The interest conditions on the receivables are at market conditions.

The loan amounts to ASC will be converted to equity upon the delivery of vessels on order from Aker Philadelphia Shipyard, Inc. (Aker Philadelphia Shipyard, Inc. is a wholly owned subsidiary of Aker Philadelphia Shipyard ASA; collectively "AKPS"). The last of those vessels is expected to be delivered in Q2 2011. The loan to ATI is a result of the Settlement Agreement with OSG (see note 23 in the consolidated accounts). This unsecured, subordinated loan of USD 20 million will become a three year term loan upon the timely delivery of the remaining vessels in the twelve ship order and the satisfactory refinancing or extension of the vessel debt and AMSC's bond obligations. This loan has interest that is payment-in-kind until it becomes a three year term loan.

Ⅵ Note 6: Total equity

Changes in equity are:

Total paid-in Amounts in USD thousands Share capital Share premium capital Other equity Total equity Equity as of 1 January 2010 42 462 137 946 180 408 (9 120) 171 288 Net result - - - (9 893) (9 893) Equity as of 31 December 2010 42 462 137 946 180 408 (19 013) 161 395

Total paid-in Amounts in USD thousands Share capital Share premium capital Other equity Total equity Equity as of 1 January 2009 42 462 137 946 180 408 13 647 194 055 Net result - - - (22 767) (22 767) Equity as of 31 December 2009 42 462 137 946 180 408 (9 120) 171 288 The share capital of NOK 276 million consists of 27 600 000 shares with a par value of NOK 10.

34 American Shipping Company annual report 2010 Performance 2010 Parent company accounts

The shares were owned by the following 20 largest parties as of 23 February 2011: Number Percent SEB ENSKILDA ASA EGENHANDELSKONTO 9 182 520 33.3% CONVERTO CAPITAL FUND AS 5 493 430 19.9% GOLDMAN SACHS & CO - SECURITY CLIENT SEGR 4 175 520 15.1% STATE STREET BANK AN A/C CLIENT OMNIBUS F 1 480 003 5.4% ODIN NORGE 1 220 278 4.4% ODIN MARITIM 710 000 2.6% THOM EIGEL INGVAR 695 000 2.5% ODIN NORDEN 670 800 2.4% STATE STREET BANK AN A/C CLIENT OMNIBUS D 535 507 1.9% COMMERZBANK AG FRANK 481 099 1.7% FRATERNITAS A/S 335 200 1.2% RO LARS 300 000 1.1% DNB NOR NORGE SELEKT VPF 156 488 0.6% THUNDER INVEST AS 156 448 0.6% O. HOVDE AS 155 000 0.6% ODIN NORGE II 76 847 0.3% MUSLIK AS 76 524 0.3% DEUTSCHE BANK AG S/A HOLDING ACCOUNT 76 100 0.3% HØGELI AS 69 800 0.3% KOPPANG DAG EYSTEIN 52 000 0.2% Total 20 largest shareholders 26 098 564 94.6% Other shareholders 1 501 436 5.4% Total 27 600 000 100.0%

Ⅵ Note 7: Other long term interest-bearing debt

The bond obligation is as follows as of 31 December 2010:

Amounts in USD thousands Maturity Balance Interest Rate Bond issue 2012 114 170 NIBOR + 4.75% Interest added to bonds outstanding 47 264 (1) Cumulative foreign currency impact 6 046 (2) Less unamortized loan fees (379) Sum Unsecured bond issue 167 101

1) Included in other interest and financial expenses. 2) Included in other interest and financial revenues.

On 16 February 2007 AMSC issued a NOK 700 million bond. The interest rate on the bond is NIBOR plus a margin of 4.75%. AMSC has the option to make any of the interest payments for the loan term as payment-in-kind (PIK) where the interest is added to the principal. AMSC also has the option to call the bond, or parts of the bond, at certain dates. The first call date was August 2009 at a call price of 104.75% of par. The second call date was August 2010 at a call price of 103.75% of par. The Company has not redeemed any parts of the bond as of 31 December 2010. The Company has elected PIK interest for all of its interest periods to date. The bond, along with any PIK interest is due in full in February 2012. As of 31 December 2010, the bond loan balance including PIK interest is NOK 977.7 million (NOK 909.9 million as of 31 December 2009). Prior to the maturity date, the Company plans to refinance or request an extension from the bondholders. If the Company is unable to refinance or extend the bond on terms favorable to the Company, it will create significant liquidity risk. The covenants on the Company's NOK denominated bond require that consolidated equity excluding cumulative unrealized gains and losses on interest rate swaps be maintained at a level not less than USD 140 million at a quarterly measurement date. As of 31 December 2010, consolidated shareholders equity for determining compliance with debt covenants was approximately USD 154.0 million. See note 20 in the consolidated accounts for an analysis of how foreign currency fluctuations could impact consolidated equity.

Subordinated loan from Converto Capital Fund AS Maturity Balance Principal amount 2017 20 000 Interest added to principal 1 973 Sum Subordinated Loan 21 973

In connection with the Settlement Agreement with OSG (see note 23 in the consolidated accounts), Converto Capital Fund AS has issued a USD 20.0 million loan to the Company. The loan is subordinated to various matters involving subsidiary companies, including the BNP Credit Agreement, as well as any potential obligations and liabilities due to OSG and any potential liability associated with AKPS's construction financing which contains a put option to AMSC (see note 10). The loan bears interest at the higher of 9.5% or LIBOR plus 5.75% (9.5% at 31 December 2010). Interest is payment in kind until certain conditions are met. It is expected that cash interest will not be paid in the next three years. The loan matures on 11 December 2017.

American Shipping Company annual report 2010 35 Performance 2010 Parent company accounts

Ⅵ Note 8: Cash and cash equivalents

There is no restricted cash.

Ⅵ Note 9: Shares owned by the board of directors and the senior management

For information regarding shares owned by the members of the board of directors and the senior management, see note 21 in the Consolidated Accounts.

Ⅵ Note 10: Guarantees

The company has made the following guarantees:

Amount Description Beneficiary (USD thousands) Guarantee party

Senior secured credit facility BNP Paribas 770 000 (1) ASC Leasing I-X Construction loan facility Caterpillar Financial Services Corp 150 000 (2) Aker Philadelphia Shipyard, Inc. Capital expenditure facility PIDC Regional Center LP XV 20 000 (3) Aker Philadelphia Shipyard, Inc. Counter guarantee Aker Maritime Finance AS 20 000 (4) Aker Philadelphia Shipyard, Inc.

1) The senior secured facility is for the financing of 10 product tankers which the company entered into with Fortis on 9 February 2007. During 2010, the Fortis credit facility was assigned to BNP Paribas as part of the purchase of Fortis by BNP. This credit facility has certain cross-defaults to AKPS's construction financing. 2) The construction loan facility is provided by Caterpillar Financial Services Corp. (CFSC) to AKPS for the construction of the remaining tanker in the twelve ship series. In connection with this facility, AMSC and CFSC entered into a put/call agreement. In the event that an event of default occurs and is continuing under the construction loan facility, CFSC may "put" the entire facility to AMSC, whereupon AMSC would be required to purchase 100% of the loans from CFSC at par plus accrued interest and unpaid expenses. The principal balance is approximately USD 16.0 million as of 31 December 2010. 3) The capital expenditure facility represents a loan from the Pennsylvania Industrial Development Corporation Regional Center, L.P. XV (Welcome Fund) to AKPS that is secured by a second mortgage against the property, plant and equipment of AKPS. This loan has a current outstanding balance of USD 20.0 million at 31 December 2010, interest is paid semi-annually and the principal is due March 2012. In connection with this facility, AMSC has agreed to guarantee the entire loan to the lender. 4) The counter guarantee relates to an agreement by AKPS to maintain minimum employment levels at the shipyard until 31 December 2014. AKPS will be required to pay liquidated damages in the event that the average number of full-time employees during a given year falls below the required minimum, subject to an aggregate cap of USD 20.0 million. This agreement is part of a Master Agreement between AKPS and the governmental parties which provided funding to the shipyard for the renovation and modernization of its facility and training of its workforce, and it is guaranteed by Aker Maritime Finance AS (as successor by merger to the former Kvaerner ASA). The counter guarantee was issued by AMSC to Aker Maritime Finance AS in connection with the organization of the AMSC Group in 2005. As part of the sale of AKPS in December 2007, AKPS issued a USD 20.0 million counter guarantee to AMSC and Aker Maritime Finance AS related to the minimum employment levels.

The continued operations at AKPS will be dependent upon its ability to obtain new orders or financing for building additional vessels. As of the date of this report, AKPS has signed an agreement with Philadelphia Shipyard Development Corporation (PSDC) which provides a basis for AKPS to build its next two product tankers. As a result, no liability has been recorded under the guarantees.

36 American Shipping Company annual report 2010 Performance 2010 Auditor’s report

American Shipping Company annual report 2010 37 Performance 2010 Auditor’s report

38 American Shipping Company annual report 2010 Performance 2010 Share and shareholder information

Share and shareholder information

American Shipping Company is committed to maintaining an open and direct dialogue with its shareholders, potential investors, analysts, brokers, and the financial community in general. The timely release of information to the market that could affect the Company’s share price helps ensure that American Shipping Company ASA’s share price reflects its underlying value.

American Shipping Company’s goal is that ownership requirement in the Jones Act From time to time, agreements are the Company’s shareholders will, over (see Articles of Association available on the entered into between two or more former time, receive competitive returns on their Company’s web page). The Company held related companies. The boards of directors investment. The Board considers the no own (treasury) shares as of and other parties involved in the decision- amount of dividend, if any, to be recom- 31 December 2010. No share issues were making processes related to such agree- mended for approval by the shareholders carried out in 2010. ments are all critically aware of the need to on an annual basis. The recommendation is handle such matters in the best interests of Stock-exchange listing based upon earnings for the year just the involved companies, in accordance American Shipping Company ASA was ended, the financial situation at the relevant with good corporate governance practice listed on the Oslo Stock Exchange on point in time and applicable restrictions and on an arm’s length basis. If needed, 11 July 2005. At that time the Company under AMSC’s financial agreements. external, independent opinions are sought. was called Aker American Shipping ASA Due to the fact that AMSC is still fund- and traded under the ticker symbol ing its tanker fleet build program, the Board Current Board authorizations “AKASA”. The name change was the result of Directors will propose at American The Board of Directors has currently no of Aker ASA reducing its majority owner- Shipping Company’s annual shareholders’ authorizations to issue any new common ship in the Company during 2008. Approval meeting that no dividend is paid for the shares. for the name change was decided upon at 2010 accounting year. the Extraordinary General Meeting held on Stock option plans 25 June 2008 and it was officially regis- Year Dividend (in NOK) The Company currently does not have any tered with the Norwegian Registry of Busi- stock option plans. 2009 0 ness Enterprises (NRBE) on 21 July 2008. 2010 Proposed 0 The Company’s shares are listed on the Investor relations Oslo Stock Exchange’s main (OSEBX) list Shares and share capital American Shipping Company ASA seeks to (ticker: AMSC). American Shipping American Shipping Company ASA has maintain an open and direct dialogue with Company’s shares are registered in the 27 600 000 ordinary common shares; each shareholders, financial analysts, and the Norwegian Central Securities Depository; share has a par value of NOK 10 (see Note financial market in general. In addition to the shares have the securities registration 14 to the Company’s 2010 accounts). As of meetings with analysts and investors, the number ISIN NO 0010272065. DnB NOR is 31 December 2010, the Company had 336 Company posts presentations and press the Company’s registrar. shareholders, of whom 9.8 percent were releases on it web page. non-Norwegian shareholders. Majority shareholder Visitors to American Shipping Compa- American Shipping Company ASA American Shipping Company ASA’s larg- ny’s website at www.americanshippingco. currently has a single share class. Each est/majority shareholder is SEB Enskilda, com can subscribe to email delivery of share is entitled to one vote, but is subject which holds 33.3 percent of the Company’s American Shipping Company news to certain voting and ownership restrictions shares. These shares were purchased from releases. due to the fact that the Company is operat- Aker ASA as part of a total return swap American Shipping Company press ing under an exception from the U.S. (TRS) agreement. releases and investor relations (IR) pub-

Date Change in share capital Share capital (in NOK million) No. of shares Par value (in NOK) 1 January 2008 276 000 000 276 000 000 10.00 Change in 2008 0 31 December 2008 276 000 000 276 000 000 10.00 Change in 2009 0 31 December 2009 276 000 000 276 000 000 10.00 Change in 2010 0 31 December 2010 276 000 000 276 000 000 10.00

American Shipping Company annual report 2010 39 Performance 2010 Share and shareholder information

lications for the current and prior year are 20 largest shareholders available at the Company’s website: as of 23 February 2011 www.americanshippingco.com. This online Shareholder Number of shares held Ownership (in %) resource includes the Company’s quarterly and annual reports, prospectuses, corpo- Seb Enskilda ASA Egenhandelskonto 9 182 520 33.3% rate presentations, articles of association, Converto Capital Fund AS 5 493 430 19.9% Goldman Sachs & Co - Security Client Segr 4 175 520 15.1% financial calendar, and its Investor Rela- State Street Bank AN A/C Client Omnibus F 1 480 003 5.4% tions and Corporate Governance policies, Odin Norge 1 220 278 4.4% along with other information. Odin Maritim 710 000 2.6% Shareholders can contact the Com- Thom Eigel Ingvar 695 000 2.5% pany at [email protected]. Odin Norden 670 800 2.4% State Street Bank AN A/C Client Omnibus D 535 507 1.9% Save the environment – Commerzbank AG Frank 481 099 1.7% read reports online Fraternitas A/S 335 200 1.2% Annual reports are published on the Ro Lars 300 000 1.1% Company’s website Dnb Nor Norge Selekt Vpf 156 488 0.6% (www.americanshippingco.com) at the Thunder Invest AS 156 448 0.6% O. Hovde AS 155 000 0.6% same time as they are made available via Odin Norge II 76 847 0.3% website release by the Oslo Stock Muslik As 76 524 0.3% Exchange/Oslo Axess: www.newsweb.no Deutsche Bank AG S/A Holding Account 76 100 0.3% (ticker: AMSC). Høgeli As 69 800 0.3% American Shipping Company ASA Koppang Dag Eystein 52 000 0.2% encourages its shareholders to subscribe Total 20 largest shareholders 26 098 564 94.6% to the Company’s annual reports via the Other shareholders 1 501 436 5.4% electronic delivery system of the Norwegian Central Securities Depository (VPS). Please Total 27 600 000 100.0% note that VPS services (VPS Invest- ortjenester) are designed primarily for Geographic distribution of shareholders Norwegian shareholders. Subscribers to as of 23 February 2011 this service receive annual reports in PDF Nationality No. of shares held Ownership (in %) format by email. Electronic distribution is the fastest Non-Norwegian shareholders 7 007 569 25.4% channel for accessing Company Norwegian shareholders 20 592 431 74.6% information; it is also cost-effective and Total 27 600 000 100.0% environmentally friendly. Quarterly reports, which are generally Ownership structure by number of shares held only distributed electronically, are available as of 23 February 2011 from the Company’s website and other sources. Shareholders who are unable to Number of Percent of Shares owned shareholders share capital receive the electronic version of interim and annual reports, may subscribe to the 1 – 100 43 0.01% printed version by contacting American 101 – 1 000 110 0.25% Shipping Company. 1001 – 10 000 126 2.13% 10 001 – 100 000 45 4.32% 100 001 – 500 000 6 5.74% Over 500 000 9 87.55% Total 339 100.00%

40 American Shipping Company annual report 2010 Performance 2010 Share and shareholder information

Analyst coverage Share price development in 2010 The following securities broker provides analyst coverage of American Shipping 2010 share data Company ASA (as of 31 December 2010): Highest traded NOK 6.80 Lowest traded NOK 4.00 Company Telephone Share price as of 31 Dec. NOK 5.00 Nicolay Dyvik (SEB Enskilda) +47 21 00 86 46 Shares issued as of 31 Dec. 27 600 000 Own (treasury) shares as of 31 Dec. 0 Annual shareholders’ meeting Shares issued and outstanding as of 31 Dec. 27 600 000 American Shipping Company ASA’s annual Market capitalization as of 31 Dec. NOK million 138.0 shareholders’ meeting is normally held in Proposed share dividend NOK per share 0.0 late March or early April. Written notifica- tion is sent to all shareholders individually or to shareholders’ nominee. To vote at shareholders’ meetings, shareholders (or their duly authorized representatives) must American Shipping Company ASAOSEBX either be physically present or must vote by 250 proxy. 200

2010 share data 150 The Company’s total market capitalization as of 31 December 2010 was NOK 138.0 100 million. During 2010, a total of 2,748,849 50 American Shipping Company ASA shares traded, corresponding to 10 percent of the 0 Jul Jan Company’s freely tradable stock. The 2005 2011 shares traded on 200 trading days.

41 American Shipping Company annual report 2009 Our organization and governance Corporate governance

Corporate governance

American Shipping Company ASAs’ Corporate Governance policy was adopted by the Board of Directors in February 2008 with subsequent amendments and additions. The Company’s corporate governance principles are based on the Norwegian Code of Practice for Corporate Governance, dated 21 October 2010.

The following presents American Shipping and other activities related hereto, including the same rights in the Company. However, Company ASA’s (hereinafter American ownership of vessels, capital management the shares are subject to certain voting and Shipping Company, AMSC, the Company and other functions for the group, as well ownership restrictions due to the fact that or the Group) practice regarding each of as participation in or acquisition of other the Company is operating under an the recommendations contained in the companies. exception from the U.S ownership Code of Practice. Any deviations from the The function of the business purpose requirement in the Jones Act (see the recommendations are found under the item clause is to ensure that shareholders have Company’s articles of association, which in question. control of the business and its risk profile, are available on the Company’s web page). without limiting the Board or manage- Equal treatment of all shareholders is Purpose ment’s ability to carry out strategic and crucial. If existing shareholders’ pre- American Shipping Company’s Corporate financially viable decisions within the emptive rights are waived upon an increase Governance principles are intended to defined purpose. The Group’s financial in share capital, the Board must justify the ensure an appropriate division of roles and goals and main strategies are presented on waiver. Transactions in own (treasury) responsibilities among the Company’s page 3 of this report and in the Board of shares must be executed on the Oslo owners, its Board of Directors, and its Director’s report. Stock Exchange or by other means at the executive management and that the listed price. Company’s activities are subject to sat- Equity and dividends If there are material transactions isfactory control. These principles contrib- Equity between the Company and a shareholder, ute to the greatest possible value creation The Group’s equity as of 31 December board member, member of executive over time, to the benefit of owners and 2010 was USD 58.2 million corresponding management, or a party closely related to other stakeholders. to an equity ratio of 6 percent. American any of the aforementioned, the Board shall Values and ethical guidelines Shipping Company regards the Group’s ensure that independent valuations are The Board has adopted the AMSC’s corpo- current equity structure as appropriate and available. rate values and ethical guidelines. Ameri- adapted to its objectives, strategy, and risk American Shipping Company ASA has can Shipping Company’s corporate values profile. prepared guidelines designed to ensure are presented below. that members of the Board of Directors and Dividends executive management notify the Board of SQE mindset American Shipping Company’s dividend any direct or indirect stake they may have We take personal responsibility because policy is included in the section Shares and in agreements entered into by the Group/ we care shareholder information, see pages 39-41 Company. Delivering results of this annual report. See information on transactions with We deliver consistently and strive to beat related parties in Note 22 to the con- our goals Board authorizations solidated accounts. Customer drive The Board’s proposals for future Board Building customer trust is key to our busi- authorizations are to be limited to defined Freely negotiable shares ness issues and to be valid only until the next American Shipping Company’s shares are People and teams annual shareholders’ meeting. freely negotiable. However, the trans- All our major achievements are team efforts ferability of shares is subject to certain Hands-on management Current Board authorizations to increase voting and ownership restrictions due to We know our business and get things done share capital and acquire own (treasury) the fact that the Company is operating Open and direct dialogue shares are presented in the section Shares under an exception from the U.S ownership We encourage early and honest communi- and Shareholder information on pages 39- requirement in the Jones Act (see the cation 41 of this annual report. Company’s articles of association, which Business are available on the Company’s web page). American Shipping Company’s business Equal treatment of shareholders and purpose clause is as follows: transactions with close associates Annual shareholders’ meetings The business purpose of the Company At the parent level, the Company has a The Company encourages shareholders to is to own and carry out industrial business single class of shares, and all shares carry participate in shareholders’ meetings. It is

42 American Shipping Company annual report 2010 Our organization and governance Corporate governance

the Company’s priority to hold the annual determines remuneration payable to com- expertise, capabilities, and experience from general meeting as early as possible after mittee members. various finance, industry, and non- the year-end. Notice of general share- Pursuant to American Shipping Compa- governmental organizations. holders’ meetings and comprehensive ny’s articles of association, the nomination Two of the three shareholder-elected supporting information is made available committee recommends candidates for Board members are up for election in 2011. for the shareholders on the Company’s members of the Board of Directors. The website and sent to the shareholders nomination committee also makes recom- The work of the Board of Directors according to the deadlines stated in the mendations as to remuneration of Board The Board of American Shipping Company Norwegian Public Company Act members. The nomination committee ASA annually adopts a plan for its work, (allmennaksjeloven). The deadline for should justify its recommendation. emphasizing goals, strategies, and shareholders to register to the general implementation. Also, the Board has shareholder’s meetings is set as close to Audit committee adopted board instructions that regulate the date of the meeting as possible. Both As of 1 July 2009, the Public Limited areas of responsibility, tasks, and division on the attendance and proxy form and the Liability Companies Act requires that of roles of the Board, Board Chairman, and notice of meeting, all procedures for regis- companies listed on a regulated market President and CEO/General Manager. The tration are thoroughly explained. In addi- shall have an audit committee. Prior to this Board instructions also feature rules tion, information on how to propose a date, the Company did not have an audit governing Board schedules, rules for notice resolution to the items on the agenda at the committee. The Board has resolved that and chairing of Board meetings, decision- General Meeting will be included in the the entire Board of Directors shall act as making rules, the President and CEO’s/ notice. the audit committee. General Manager’s duty and right to dis- Pursuant to the Company’s articles of close information to the Board, pro- association, the Chairman of the Board or Board composition and independence fessional secrecy, impartiality, and other an individual appointed by the Board The Company does not have corporate issues. Chairman will chair general shareholder’s assembly. The Board itself assesses the need to meetings. To the extent possible, Board Pursuant to the Company’s articles of elect a deputy chairman. members and the auditor attend annual association, the Board comprises between The Board evaluates its own perform- shareholders’ meetings. 3 and 9 members. Further, up to 3 ance and expertise once a year. Minutes of shareholders’ meetings are shareholder-elected deputy board mem- published as soon as practically possible bers may be elected annually. Pursuant to Risk management and internal control via the Oslo Stock Exchange messaging the Company’s corporate governance poli- The Board is to ensure that the Company service www.newsweb.no (ticker: AMSC) cy, the Board is to comprise a total of 3 maintains solid in-house control practices and on the Company’s website members. The Board chairman is elected at and appropriate risk management systems www.americanshippingco.com. the Company’s shareholders’ meeting. The tailored to the Company’s business activ- Board elects its own Deputy Board Chair- ities. The Board annually reviews the Nomination committee man. Company’s most important risk areas and American Shipping currently does not have The majority of the shareholder- internal control systems and procedures, a nomination committee. Upon the reduc- elected Board members are to be and the main elements of these assess- tion by Aker ASA of its majority ownership independent of the Company’s executive ments are mentioned in the Board of Direc- position in American Shipping Company in management and its significant business tors’ report. The issue is further described June 2008, the former nomination commit- associates. Further, no fewer than two of in Note 1 to the consolidated accounts. tee members stepped down from their the shareholder-elected Board members positions and were not replaced. As pro- are to be independent of the Company’s Remuneration of the Board of vided in our articles of association, the main shareholder. Representatives of Directors shareholders may decide to reconstitute American Shipping Company’s executive Board remuneration is to reflect the the nomination committee at the general management are not to be Board mem- Board’s responsibility, expertise, time meeting. If the nomination committee is bers. With the exception of the audit spent, and the complexity of the business. reconstituted, pursuant to the articles of committe, the Board has not deemed it Remuneration does not depend on Ameri- association, the nomination committee is to necessary to establish Board committees can Shipping Company ASA’s financial comprise no fewer than three members. at this time. performance. Board members and compa- The composition of the nomination The current composition of the Board nies with whom they are associated must committee must reflect the interests of the is presented on page 45 of this annual not take on special tasks for the Company shareholders, and must ensure nomination report; the Board members’ expertise, beyond their Board appointments unless committee members’ independence from capabilities, and independence are also such assignments are disclosed to the full American Shipping Company’s Board and presented. Board members’ shareholdings Board and remuneration for such additional executive management. Nomination com- are presented in Note 21 to the con- duties is approved by the Board. mittee members and chair are elected by solidated accounts. The Company encour- Additional information on remuneration shareholders at the Company’s annual ages the board members to invest in the paid to Board members for 2010 is pre- shareholders’ meeting, which also Company shares. The shareholder-elected sented in Note 21 to the consolidated Board members represent a combination of accounts.

American Shipping Company annual report 2010 43 Our organization and governance Corporate governance

Remuneration of executive including the requirement of equal treat- Upon the issuance of an offer for the management ment. All stock exchange notifications and Company’s shares, the Board will make a The Board has adopted guidelines for press releases are made available on the statement to the shareholders that provides remuneration of executive management in Company’s website an assessment of the bid, the Board’s accordance with the Allmennaksjeloven www.americanshippingco.com; stock recommendations, and reasons for these (Norwegian Public Limited Company Act) § exchange notices are also available from recommendations. For each instance, an 6-16a. Salary and other remuneration of www.newsweb.no. All information that is assessment will be made as to the neces- American Shipping Company ASA’s Presi- distributed to shareholders is simulta- sity of bringing in independent expertise. A dent and CEO/General Manager are neously published on American Shipping valuation is to be recorded in the Board’s determined by a meeting of the Board of Company ASA’s website. The Company statement. Directors. endeavors to hold open presentations in Transactions that have the effect of American Shipping Company ASA connection with the reporting of the results sale of the Company or a major component does not have stock option plans or other and the presentations are often available of it are to be decided on by shareholders such share award programs for employees. on the web. at a shareholders’ meeting. Further information on remuneration for The Company’s financial calendar is 2010 for members of American Shipping found on page 1 of this annual report. Auditor Company ASA’s executive management is The auditor will make an annual pre- presented in Note 21 to the consolidated Takeovers sentation to the Board of a plan for the accounts. The Group’s guidelines for auditing work for the year. Further, the The overriding principle is equal treatment remuneration to executive management are auditor is to provide the Board with an of shareholders. The principles are based discussed on page 27 of this annual report annual written confirmation that the on the bidder, the target company and the and will be presented to the shareholders requirement of independence has been management all having an independent at the annual general meeting. met. responsibility for fair and equal treatment of The auditor participates in the Board the shareholders in a takeover process, Information and communications meeting that deals with the annual and that the target company is not American Shipping Company’s reporting of accounts. One meeting a year is held unnecessarily disturbed. It is the responsi- financial and other information is to be between the auditor and the Board, at bility of the target company’s board to based on openness and on equal treatment which no representatives of executive ensure that the shareholders are kept of shareholders, the financial community, management are present. informed and that have reasonable time to and other interested parties. Guidelines have been established for assess the offer. The long-term goal of American Ship- executive management’s use of auditors Unless the Board has particular rea- ping Company’s investor relations activities for services other than auditing. Auditors sons for so doing, it will not take steps to is to ensure the Company’s access to capi- are to provide the Board with an annual prevent or obstruct a take-over bid for the tal at competitive terms and to ensure overview of services other than auditing Company’s business or shares, nor use shareholders correct pricing of shares. that have been supplied to the Company. share issue authorizations or other meas- These goals are to be accomplished Remuneration for auditors, presented ures to hinder the progress of the bid, through correct and timely distribution of in Note 3 to the consolidated accounts, is without such actions being approved by information that can affect the Company’s stated for the two categories of auditing the general shareholders’ meeting after the share price; the Company is also to comply and other services. In addition, these take-over offer has become public knowl- with current rules and market practices, details are presented at the annual general edge. meeting.

44 American Shipping Company annual report 2010 Our organization and governance Presentation of the Board of Directors

Presentation of the Board of Directors

Annette Malm Justad Chairman

Ms. Justad (born 1958) has been a member of American Shipping Company ASA’s Board of Directors since December 2007. From 2006 through 2010, she held the position of CEO of Eitzen Maritime Services ASA, a Norwegian marine shipping services Company. Prior to that she has held various positions in large companies such as Yara International ASA, Norgas Carriers/IM Skaugen ASA, and Norsk Hydro ASA. Ms. Justad is a member of the Board of Petroleum Geo Services ASA. Ms. Justad holds a Master degree of Technology Management from MIT (Sloan School)/NTH/NHH in addition to a MSc in Chemical Engineering from NTH. Ms. Justad is a Norwegian citizen. Ms. Justad holds zero shares in the Company and has no stock options. She has been elected for the period 2009-2011.

Dag Fasmer Wittusen

Mr. Wittusen (born 1944) is a Senior Advisor and Partner of Aker ASA. He has extensive experience in international finance, investment banking, restructuring and management. He has held numerous positions within the Aker Group, including Executive Director of TH Global (ex Kvaerner plc), head of Aker Finans AS, member of various Aker boards, Executive Vice President of Aker RGI, and Managing Director of RGI. Co-founder of Orkla Finans Group and principal advisor to RGI. Also former Vice President of Eksportfinans and Loan Officer at the World Bank. He holds a BA from Brown University and an MPA from Princeton University. Mr. Wittusen is a Norwegian citizen. He holds 10,000 shares in the Company. He has been elected for the period 2009-2011.

John Rose

Mr. Rose (born 1953) became a member of American Shipping Company ASA’s Board of Directors in June 2008. He is currently an Independent Management Consultant with worldwide experience in shipping. He has over 35 years of experience with extensive senior management employment in worldwide shipping and port operations, specializing in strategic support for Shipping Companies and those involved in Oil Trading, Downstream Supply Distribution, Upstream Exploration & Productions and Liquid Natural Gas (LNG) business. Previous management experience is largely based on 28 years of employment with Shell. Mr. Rose holds a Master of Laws LLM from the University of Southampton. Mr. Rose is a British citizen. Mr. Rose holds zero shares in the Company and has no stock options. He has been elected for the period 2010-2012, but resigned his position on the Board of Directors as of 1 March 2011.

Lars Solbakken

Mr. Solbakken (born 1957) is currently Chief Executive Officer of Norwegian Car Carriers ASA. From 2006 to 2009 he served as CEO of Ship Finance International Limited. In the period from 1997 through 2006, Mr. Solbakken was employed as General Manager of Fortis Bank in Norway and was also responsible for the bank’s shipping and oil service activities in Scandinavia. From 1987 to 1997, Mr. Solbakken served in several positions in Nordea Bank (previously Christiania Bank). He was Senior Vice President and Deputy for the shipping and offshore and aviation group, head of equity issues and merger and acquisition activities and General Manager for the Seattle Branch. Prior to joining Nordea Bank, Mr. Solbakken worked five years in Wilh. Wilhelmsen ASA as Finance Manager. Mr. Solbakken has a Master of Science degree from the Norwegian School of Economics and Business Administration in Bergen. He is a Norwegian Citizen and holds zero shares of stock in the Company. Mr. Solbakken was elected to the Board of Directors at the Company’s Extraordinary General Meeting on 1 March 2011 and was elected for the period 2011-2013.

American Shipping Company annual report 2010 45 Our organization and governance Presentation of Management

Presentation of Management

Greg Matecki President, CEO and CFO

Mr. Matecki (born 1960) joined American Shipping Company as CFO in June 2008. In January 2010, he was appointed by the Board of Directors as the President and CEO and will continue to hold the position of CFO. Mr. Matecki has 25 years of corporate financial experience including strategic planning, reporting and analysis. Prior to joining American Shipping Company, Mr. Matecki was employed by Binswanger, an international full- service real estate firm, where he was Vice President and Chief Financial Officer. Mr. Matecki has a Masters of Business Administration from Villanova University, a Bachelors Degree in Accounting and Finance from LaSalle University, and is a Certified Public Accountant in the Commonwealth of Pennsylvania. As of 31 December 2010, Mr. Matecki holds zero shares in the Company and no stock options. Mr. Matecki is a U.S. citizen.

46 American Shipping Company annual report 2010 Our organization and governance Contact Information

American Shipping Company ASA Oslo Office Fjordalleen 16, P.O. BOX 1423, Vika, NO-0115 Oslo, NORWAY Tel: + 47 24 13 00 00, Fax: + 47 24 13 01 01

Philadelphia Office Philadelphia Naval Business Center One Crescent Drive, Suite 104 Philadelphia, PA 19112 USA Tel: + 1 (866) 588-6106, Fax: +1 (215) 468-2378

American Shipping Company annual report 2010 47

Project management: RR Donnelley

Photo/illustrations: All photos courtesy of American Shipping Company ASA

Layout/production: RR Donnelley American Shipping Company

Annual report 2010

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